Financial Market Imperfections and Home Ownership: A Comparative Study

We explore the determinants of the international pattern of home ownership using the Luxembourg Income Study (LIS), a collection of microeconomic data on fourteen OECD countries. In most, the cross-section is repeated over time and includes several demographic variables carefully matched between the different surveys. This allows us to construct a truly unique international dataset, merging data on more than 400,000 households with aggregate panel data on mortgage loans and down payment ratios. After controlling for demographic characteristics, country effects, cohort effects and calendar time effects, we find strong evidence that the availability of mortgage finance - as measured by outstanding mortgage loans and down payment ratios - affects the age-profile of home ownership, especially at the young end. The results have important implications for the debate on the relationship between saving and growth.