Source: CenDEF
Cross-Country Differences in Homeownership
A cultural phenomenon?
Cross-country differences in homeownership rates are large and persistent over time, ranging from 44% in Switzerland to 83% in Spain. In this project, we test the hypothesis that cultural tastes drive these cross-country differences. To isolate the effect of cultural preferences regarding homeownership from the impact of institutions and economic factors, we investigate the homeownership decisions of second-generation immigrants in the United States during 1994-2017. On average, second-generation immigrants are as likely to own their primary residence as native households. However, within the United States, we discover considerable variation in homeownership rates across second-generation immigrant groups from different cultural backgrounds. In fact, the persistent cross-country differences in homeownership rates are replicated by their descendants in the United States. We show that the aggregate homeownership rate in the immigrants country of ancestry, our proxy for cultural preferences regarding homeownership, is an important explanatory factor for homeownership decisions of second-generation household heads. The effect is quantitatively meaningful. In the baseline sample, it accounts for 5% of the variation in homeownership rates across second-generation immigrant groups. The impact of cultural preferences is substantially larger for married second-generation immigrants sharing the same cultural background with their spouse; it accounts for 39% of the variation in homeownership rates
across second-generation immigrant groups within the United States. We show that cultural preferences for homeownership are persistent, transmitted between generations and that they substantially influence the rent-versus-buy decision.
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