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Geographic reallocation and unemployment during the Great Recession: The role of the housing bust

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  • Karahan, Fatih
  • Rhee, Serena

Abstract

We provide a spatial general equilibrium model of migration and job searching to study the role the housing bust played in mobility rates and labor market outcomes. We estimate the parameters governing the migration decisions of households using data on state-level migration and labor market patterns from 1991 to 2007 and use the estimated model to characterize the effects of the housing market collapse on labor market outcomes. Our analysis suggests that the housing bust is responsible for 12% of the increase in unemployment as it reduces workers’ reallocation and forces more homeowners to look for jobs in areas with lower job-finding rates.

Suggested Citation

  • Karahan, Fatih & Rhee, Serena, 2019. "Geographic reallocation and unemployment during the Great Recession: The role of the housing bust," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 47-69.
    • Handle: RePEc:eee:dyncon:v:100:y:2019:i:c:p:47-69
    DOI: 10.1016/j.jedc.2018.12.007
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    More about this item

    Keywords

    Geographic reallocation; Housing bust; Migration; Unemployment;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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