Source: The Conversation – France (in French)– By Guillaume Vuillemey, Associate Professor of Finance, HEC Paris Business School
Buying or renting an apartment or a house is surely a financial decision that one imagines based on personal considerations. However, individuals’ decisions regarding property ownership would be influenced by inherited cultural beliefs. The cause: the agricultural past of their ancestors.
Did your ancestors cultivate the plains of a European agricultural region like Ukraine or the Beauce? Or did they raise cattle near the Horn of Africa? Far from being trivial, the answer to this question could partly determine whether or not you are today the owner of your home.
The results of a large empirical study that we conducted indeed indicate that thecultural representations related to the land and livestock– respectively immovable and movable assets – are passed down from generation to generation. These concepts still help explain today the likelihood that an individual becomes a property owner. In particular, people from societies historically based on cereal agriculture are more likely to own real estate than others.
An important financial decision
“Should one buy a house/an apartment or simply rent?” This is undoubtedly the most important financial decision for most households, who thus choose to make their home (rather than gold or stocks) their main asset. Beyond economic considerations (such as the ability to repay a loan over 20 years), property ownership is also influenced by how individuals perceive the security, value, and social status associated with a home.
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However, these cultural preferences are deeply rooted: they originate from ancient agricultural societies where wealth mainly depended on two types of assets, one movable (livestock), the other immovable (land). But the fields and herds were much more than simple economic assets. They permeated the culture, through myths and folklore, which have left traces and still influence today the representations – and, ultimately, the rates of home ownership.
Individuals from societies historically dominated by cereal agriculture, where land was valued more than mobile assets, tend to favor immobile assets and thus become owners more often.
The weight of cultural heritage
To support this hypothesis, we analyzed an ethnographic corpus. The contained datain a worldwide database related to folkloreshow that, in societies based on agriculture, motives related to land are more present in their narratives, while pastoral societies emphasize livestock more. Among the former are most European countries, from ancient Greek times to the Middle Ages, where land was associated with power and prestige for centuries.
One can think ofPuss in Boots, where the cunning cat passes off the miller’s son as a landowner to ensure him a happy ending. Conversely, in somePastoral societies of East Africa such as that of the Nuer, power structures and social representations are based on livestock.
Today, Western countries, like many pastoral societies, have become industrial or even post-industrial economies, having left behind most of their traditional institutions related to land or livestock. Yet, these cultural heritages persist and continue to influence how societies perceive mobile and immobile assets.
Persistent Legacies
The examination of current data from the OECD area (41 countries with homogeneous data) largely confirms the hypothesis posed. It is in countries with a strong agricultural tradition based on land that we also find higher home ownership rates today. The effect is significant: an increase of one standard deviation in the relative importance of cultivated land (compared to pastures) is associated with an approximate 6-point rise in the ownership rate.
The same pattern appears at the regional level in Europe. Even when neutralizing the effects specific to each country, historically agricultural regions show higher ownership rates. However, these results alone do not prove a causal link. Other explanations could exist.
Thus, cultural representations travel with immigration; it is necessary to distinguish the influence of culture from that of local experience, such as wars, inflation, or other factors that can also influence the decision to purchase a property.
The weight of crops
For this, we analyzed the behavior of second-generation immigrants in the United States. The idea is that these individuals – a sample of more than 5,000 people – live within the same institutions and the same economic system, but inherit different cultures depending on their parents’ country of origin (145 countries).
The results confirm our hypothesis: descendants of societies historically based on agricultural crops have a higher probability of being homeowners. This result remains robust after controlling for numerous factors such as income, education, ethnic origin, geographic location, marital status, or household structure.
To ensure the robustness of the explanation, it is appropriate to test alternative explanations. The previously highlighted result persists even after taking into account factors such as GDP, inequalities, democracy, the rule of law, or broader cultural indicators.
The data suggest that it is not simply a “general property culture.” What predicts property ownership among second-generation immigrants is the share of property in the country of origin, which is explained by agricultural conditions and soil characteristics. This reinforces the idea of a specific cultural heritage linked to agriculture.
Guillaume Vuillemey does not work for, advise, own shares in, receive funds from any organization that could benefit from this article, and has declared no other affiliation than his research institution.
–ref. Real estate, a cultural heritage of agriculture –https://theconversation.com/real-estate-property-a-cultural-heritage-of-agriculture-281439