Please use this identifier to cite or link to this item: https://hdl.handle.net/10620/17484
Longitudinal Study: HILDA
Title: Means-tested Age Pension and Homeownership: Is There a Link
Authors: Sane, R 
Cho, S 
Institution: University of New South Wales
Issue Date: 3-Feb-2012
Pages: 32
Keywords: Social+Income
Borrowing
Pension
Housing
Means Test
Abstract: Several targeted welfare programs across the world have made owner-occupied housing exempt from the means test, such as the Supplementary Social Income (SSI) in the US and the age pension scheme in Australia. Relatively little is known about the impact of such exemption on household portfolio choice. We study the case of the Australian age pension scheme, and argue that current uncapped exemption may lead to distortionary incentives for very high levels of housing wealth to be sheltered from the means test. We set up a quan- titative lifecycle framework, with business and housing investment, borrowing constraints, and wealth inequality, that is able to match a number of key features in the Australian economy. We nd that abolishing the current exemption of owner-occupied housing in the assets test increases aggregate output, capital accumulation, and welfare, while lowering housing investment and homeownership. However, removing such distortions, however, does not necessarily imply that all households would be better o . The lowering of other taxes to maintain scal balance would result in households at the top of the wealth distribution experiencing a large welfare loss, however the majority of the population would beneit.
URL: http://research.economics.unsw.edu.au/RePEc/papers/2011-02.pdf
ISBN: 1837-1035 & ISBN 978-0-7334-3003-9
Research collection: Technical working papers and reports
Reports and technical papers
Appears in Collections:Reports

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