Recent research indicates that the significant increase in U.S. income inequality experienced has not been matched by an similar increase in consumption inequality. This paper reexamines the role of saving/dissaving in a house as a vehicle for this successful consumption smoothing. American Housing Survey data shows that these expenditures are economically significant, amounting to around $1,750. This compares to estimates from the labor literature reporting average annual transitory income variance of about $2,200. We find a significant elasticity of maintenance/repair expenditures to transitory income shocks, and larger elasticities for less well-educated households who are more likely to be liquidity constrained.
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