Abstract
In this paper we empirically investigate the effect of labor income uncertainty on the probability of homeownership in Germany and Spain. This study is motivated by two facts. Firstly, theoretical models tend to provide ambiguous results on this issue. Secondly, previous empirical evidence focuses exclusively on the US housing market. To carry out our analysis we propose more precise income uncertainty measures based on panel data labor income equations. We observe that households facing high levels of income uncertainty display a preference for renting, while those located in more positively skewed income distributions show a greater propensity for homeownership.
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