Empirical studies have estimated a large range of consumption responses to changes in housing prices. Using a quasi-experiment, we estimate a shock of −19.4 percent to single-family house prices in the area surrounding an airport in Stockholm after its operations were unexpectedly continued as a result of political bargaining behind closed doors. Using a household data set with information on the locations of primary residences relative to the airport, we find a short-run elasticity with respect to new car purchases of 0.28, corresponding to a one-year marginal propensity for expenditure on cars (car MPX) of 0.09 cents per dollar lost in housing wealth. Households with high loan-to-value ratios and small bank deposits respond the most. A quantitative model aligns with our empirical findings but also suggests that the car MPX could be 0.31 cents when used cars are included; of this, 73 percent is explained by a collateral channel. When nondurables are accounted for, the total marginal propensity to spend is 2.1 cents. In the case of an absolute fall in housing prices, the total response is four times greater.

We derive optimal characteristics of contribution rates into defined contribution pension plans based on consumption-savings theory. Contribution rates should increase with age and decrease with the balance-to-income ratio. Using Swedish registry data, we show that on average, individuals save according to those principles. However, almost half of the population behaves hand-to-mouth and does not undo the mandated constant contribution rates. In a quantitative model, designing contribution rates to follow the principles implies a 1.8% welfare gain and less dispersed replacement rates, while maintaining the same average replacement rate. Results are robust to various sources of model misspecification, including temptation preferences.

Homeownership is widely stimulated by policy, yet its economic effects are poorly understood. We exploit quasi-random variation in homeownership generated by privatization decisions of municipally owned buildings and use granular data on demographics, income, housing, financial wealth, and debt that allow us to construct high-quality measures of spending. Homeownership causes wealth accumulation via house price appreciation, increases consumption, and improves consumption smoothing across time and states of the world. It increases mobility for young households, who move up the property ladder, and amplifies wealth accumulation for older households, who take more risk in their financial portfolio.

We introduce a novel survey measure of attitude towards debt. Matching our survey results with panel data on Swedish household balance sheets from registry data, we show that our measure of debt attitude helps to explain individual variation in indebtedness as well as debt build-up and spending behavior in the period 2004-2007. As an explanatory variable, debt attitude compares well with a number of other determinants of debt, including education, risk-taking, and financial literacy. We also provide evidence that suggests that debt attitude is passed down along family lines and has a cultural element.

We examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow transmission channel of monetary policy. On average, indebted households reduce consumption spending by an additional 0.23-0.55 percentage points in response to a one-percentage-point increase in the policy rate, relative to a household with no debt. We show that these responses are driven by households that have some or a large share of their debt in contracts where interest rates vary with short-term interest rates, such as adjustable-rate mortgages (ARMs), which implies that monetary policy shocks are quickly passed through to interest expenses.

The stock market participation rate among homeowners is twice as high as among renters. This paper builds a life-cycle portfolio choice model with endogenous housing tenure choice. A stylized form of preference heterogeneity generates a substantial difference in participation rates. A majority of households have a large savings motive and choose to be homeowners and participate. A minority of households have a small savings motive and find it less worthwhile to participate. Fewer of these households become homeowners. Difference-in-difference regressions on panel data do not find evidence of a crowding-out effect of homeownership on participation, supporting the message that preference heterogeneity matters.

Compensation of mutual fund managers is paramount to understanding agency frictions in asset delegation. We collect a unique registry-based dataset on the compensation of Swedish mutual fund managers. We find a concave relationship between pay and revenue, in contrast to how investors compensate the fund company (firm). We also find a surprisingly weak sensitivity of pay to performance, even after accounting for the indirect effects of performance on revenue. Firm-level fixed effects, revenues, and profits add substantial explanatory power for compensation.

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals' holdings inside and outside the pension system, we find substantial heterogeneity within and between passive and active investors in terms of labor income, financial wealth, and stock market participation. We build a life-cycle consumption-savings model, with a DC pension account and an opt-out/default choice, that produces realistic investor heterogeneity. Relative to a common age-based allocation, implementing the optimal default asset allocation implies a welfare gain of 1.5% during retirement. Much of the gain is attainable with a simple rule of thumb.

We construct a new consumption measure as a residual from the budget constraint. Consumption is that part of income that is not used to increase assets. Our measurement relies on detailed Swedish registry data on the various sources of income and the composition of households’ asset portfolio, collected as part of the tax assessment process. The richness of the data allows us to impute a household-specific portfolio return, which is important to arrive at an accurate consumption measure with our method. We match the Swedish households that are surveyed with a standard European Household Budget Survey to our data set, allowing a detailed comparison of the two consumption measures. We find that the survey-based measures understate consumption for home-owners, high-income, and high-wealth households. Survey-based consumption appears unbiased for the average renter and, if anything, slightly understates consumption for the youngest and poorest in our sample. Taken together, the survey understates consumption inequality. Separately, Swedish car registry data on car transactions indicate severe reporting biases in the survey. 

Recent evidence suggests that there is genetic basis for economic behaviors, including preferences for risk taking. We correlate variation in risk taking and behavioral biases with two genetic polymorphisms related to the uptake of dopamine and serotonin (7R+ DRD4 and s/s 5-HTTLPR), hypothesizing that they are positively (negatively) related to risk taking. We use a small but detailed sample of active investors where we combine survey data with DNA samples and data from Swedish tax records that give us objective information about actual economic choices. We find a positive (negative) relationship between the dopamine (serotonin) gene and life expectancy bias, but no other significant correlations between the two genes and behaviors, including risk taking and measures of equity holdings. We acknowledge that our tests suffer from low power originating from the small sample size, which warrants some caution when interpreting these results.