Housing wealth and retirement

This project studies the impact of housing wealth on retirement decisions. Understanding the role of housing wealth in retirement decisions is vital as housing wealth is the single most important component of wealth for the majority of the households . In addition, the share of households that own a home is larger than the share that hold any other financial asset. Hence, housing wealth changes affect a much more representative set of households than is the case for other assets. Finally, housing markets have faced historic levels of volatility in recent decades. Understanding how this volatility affects retirement decisions of the elderly is important and relevant in its own right. Empirical identification of the effects of housing wealth on retirement is complicated because wealth is not randomly assigned. We address this problem by investigating the impact of plausibly exogenous short-run home price fluctuations in Denmark on retirement decisions. The richness of the Danish register data allows us to control for a wide array of observable characteristics concerning the home-owners (education, income, marital status, number of children, employment status). Additionally, we control for municipality by year fixed effects to take into account any unobserved year-specific municipality level shocks that may be correlated with home prices and retirement decisions (e.g., economic conditions), as well as age of home purchase by year of home purchase fixed effects to account for the fact that those who have been in a house longer are more exposed to housing market changes and are more likely to retire as they age.