DAN Management Brown Bag Series
January 20, 2017
1:00 - 2:00 pm
In this paper I study the role of a household’s expenditures on durables in its smoothing strategy for consumption. I ask, “Do home owners spend less on maintaining their homes when they earn less than expected?” and “Are there spatial implications of households’ smoothing strategy?” To answer these questions, I estimate the elasticity of home maintenance expenditures to transitory earnings. The results show that households do smooth consumption by reducing home maintenance expenditures when transitory earnings are negative, but do not do so by spending more when transitory earnings are positive. Households that are mobility constrained do use home expenditures as a smoothing strategy, but those that are not constrained do not. The results also show an asymmetry by gender: males reduce maintenance expenditures for negative transitory earnings while females increase these expenditures for positive transitory earnings. The paper draws spatial implications of the main results, using the city of Toronto as a case study.
Open to all Faculty and Staff!