William A. V. Clark and William Lisowski, “Prospect Theory and the Decision to Move or Stay.” Proceedings of the National Academy of
Sciences of the United States of America 114(36): E7432–E7440,
September 5, 2017.
• Clark and Lisowski examine residential moves (of 70 kilometers or more) in Australia between 2010 and 2014.
• The analysis assumes that the status quo residence represents the reference point.
• The authors argue that the endowment effect in housing occurs because residents learn more about advantages and disadvantages of their housing, and that this raises “use values” relative to “exchange values.”
• Previous empirical evidence indicates that the probability of moving decreases with the duration of living in the current residence; the authors, therefore, include a duration variable, as well as an indicator for owning versus renting, among their independent variables.
• Clark and Lisowski also possess a variable that captures the extent of self-reported risk aversion on the part of the surveyed individual. It turns out that people who don’t move are quite likely to be in the top half of the population in terms of this measure of risk aversion.
• Movers tend to be younger, and they tend to be renters in their initial residence. Couples with kids are less likely to move.
• Both duration and home ownership are associated with decreased re-location, which the authors interpret as an endowment effect -- but are these endowment effects?
• Clark and Lisowski examine residential moves (of 70 kilometers or more) in Australia between 2010 and 2014.
• The analysis assumes that the status quo residence represents the reference point.
• The authors argue that the endowment effect in housing occurs because residents learn more about advantages and disadvantages of their housing, and that this raises “use values” relative to “exchange values.”
• Previous empirical evidence indicates that the probability of moving decreases with the duration of living in the current residence; the authors, therefore, include a duration variable, as well as an indicator for owning versus renting, among their independent variables.
• Clark and Lisowski also possess a variable that captures the extent of self-reported risk aversion on the part of the surveyed individual. It turns out that people who don’t move are quite likely to be in the top half of the population in terms of this measure of risk aversion.
• Movers tend to be younger, and they tend to be renters in their initial residence. Couples with kids are less likely to move.
• Both duration and home ownership are associated with decreased re-location, which the authors interpret as an endowment effect -- but are these endowment effects?
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