Capital Leakage, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restriction Spillovers

Employing a unique quasi-experiment -- spillovers caused by the imposition of local house purchase restrictions to nearby non-regulated cities, we study the effects of out-of-town housing demand and policy spillovers. This quasi-experiment induces sharp increases in house prices but not local fundamentals in nearby non-regulated cities, providing plausibly exogenous house price booms. The estimated spending response is positive in the aggregate, and echoing Favilukis and Van Nieuwerburgh (2017), strongly redistributive across demographic groups, and is negative for renters, around zero for single-home owners, but positive for multi-property owners. Our results suggest that "pure" housing wealth effect can engineer powerful real consequences.