Local Housing Market Liquidity and Preferences for Social Insurance

Abstract

Starting from recent work on homeownership and political preferences, I examine the relationship between homeownership and social insurance in the context of local housing market conditions. In particular, I focus on how "liquid" a local housing market is, and how this affects homeowners' preferences for social spending. I offer two different predictions for how high local housing market liquidity may affect preferences for social insurance. High liquidity increases individuals' access to housing wealth, which can be used as private insurance. In the first hypothesis, this increased private insurance (and perception of wealth) results in the homeowner decreasing his or her demand for social insurance. In the second hypothesis, increased private insurance increases pro-social feelings, and results in the homeowner increasing his or her demand for social insurance. My findings strongly reject the first hypothesis, and provide tentative support for the second.