Christian Langholz Carstensen defends his PhD thesis

Christian Langholz Carstensen defends his PhD thesis:"Three Essays on Housing Markets: Price Dispersion, Dynamic Location Choices and Family Investments"

Candidate

Christian Langholz Carstensen

Time and place

16. novtember 2020, 16:00. Link to attend the defense:https://ucph-ku.zoom.us/j/9536476672

Evaluation committee

• Professsor Asger Lau Andersen, Department of Economicst, University of Copenhagen, Denmark (chairman)
• Professor Jesper Rangvid, CBS, Denmark
• Professor Nicolai V. Kuminoff, Arizona State University, USA

Abstract
This thesis consists of three independent chapters concerning investment decisions of households on the housing market. Chapter 1 considers how a local housing market may experience a differentiated development in prices across housing segments in response to a financial contraction. Housing prices in Copenhagen fell the most among homes that were already in the cheapest segments before the onset of the financial crisis of 2007. Furthermore, a close co-movement of housing prices and housing liquidity, measured in time-on-market is observed. Rationalizing these trends requires a non-stationary model that allows for search frictions together with rich heterogeneity among households and homes. To this end, I create an agent-based model which is apt to meet these requirements. When calibrated to the housing market of Copenhagen, the model is able to replicate qualitatively the development in prices and liquidity following the financial crisis of 2007.

Chapter 2 is co-authored with Maria Juul Hansen, Fedor Iskhakov, John Rust and Bertel Schjerning. We present a dynamic structural equilibrium model for residential and job location decisions. A central aspect of the model is that households make residential location decisions in tandem with their job location decisions without assuming that job and residence must lie within the same local area. Households are thus implicitly choosing how far to commute. Two other key features are that job location decisions are subject to search frictions and housing prices are simulated in equilibrium. We estimate the model on micro data for the Greater Copenhagen Area and simulate two counterfactual scenarios. One that increases the supply of housing in Central Copenhagen and one that increases travel times between all municipalities. As housing supply is increased locally, prices fall everywhere and urbanization is increased. When travel times increase, housing prices fall in peripheral municipalities, households commute less and more households end up without employment.

Chapter 3 considers the phenomenon of parental landlord arrangements in Denmark. A set of tax rules originally intended for self-employed workers benefit parents who purchase an apartment for the sake renting it out to their children. Such an arrangement places parents in an economically interesting trade-off, as it represents an opportunity to reap financial gains while also supporting their children. Therefore, the outcome is telling about the degree of economic altruism of parents. Regressions on investment choices and discounts if a child subsequently buys the apartment show that both motives direct parents’ decisions. In order to illustrate the welfare effects of the current tax rules, I construct a collective model of the decision process. The results suggest that welfare inequality and housing prices increase as a result of the tax rules.