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Housing tenure and labor market impacts: The search goes on

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  • Coulson, N. Edward
  • Fisher, Lynn M.

Abstract

We develop two search-theoretic models emphasizing firm entry to examine the Oswald hypothesis, the idea that homeownership is linked to inferior labor market outcomes, and compare their predictions to three extant theories. The five models have surprisingly different predictions about the labor market at both the aggregate and micro levels. Using a suitable instrumental variable strategy, we estimate both micro and aggregate level regression models of wages and unemployment and compare the estimates to those predictions. We find that while homeowners are less likely to be unemployed, they also have lower wages, all else equal, compared to renters. In addition, higher regional homeownership rates are associated with a greater probability of individual worker unemployment and higher wages. The outcome of a horserace between our new search-theoretic models is mixed--the wage-posting model predicts observed unemployment impacts while a bargaining variant does a better job explaining observed wages and aggregate labor market outcomes. Overall, we conclude that firm behavior is important for understanding the labor market impacts of homeownership. Because this is the case, regional homeownership rates are not good instruments for individual tenure choice in empirical work. And while individual homeowners may have inferior labor market outcomes as compared to renters, from the viewpoint of society, higher homeownership rates may result in greater job creation and overall production, among other benefits.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 65 (2009)
Issue (Month): 3 (May)
Pages: 252-264

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Handle: RePEc:eee:juecon:v:65:y:2009:i:3:p:252-264

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Homeownership Immobility Unemployment Search theory;

References

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  1. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, . "Are Home Owners Really More Unemployed?," Economics Working Papers 2003-15, School of Economics and Management, University of Aarhus.
  2. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  3. Jakob Roland Munch & Michael Rosholm & Michael Svarer, 2006. "Home Ownership, Job Duration, and Wages," CAM Working Papers 2006-08, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  4. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
  5. Hughes, Gordon & McCormick, Barry, 1981. "Do Council Housing Policies Reduce Migration between Regions?," Economic Journal, Royal Economic Society, vol. 91(364), pages 919-37, December.
  6. Joshua D. Angrist & William N. Evans, 1996. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," NBER Working Papers 5778, National Bureau of Economic Research, Inc.
  7. Harminder Battu & Ada Ma & Euan Phimister, 2008. "Housing Tenure, Job Mobility and Unemployment in the UK," Economic Journal, Royal Economic Society, vol. 118(527), pages 311-328, 03.
  8. Dohmen, Thomas J., 2005. "Housing, mobility and unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 305-325, May.
  9. Li Gan & Qinghua Zhang, 2005. "The Thick Market Effect on Local Unemployment Rate Fluctuations," NBER Working Papers 11248, National Bureau of Economic Research, Inc.
  10. M. van Leuvensteijn & Pierre Koning, 2004. "The Effect of Home-ownership on Labor Mobility in The Netherlands," Working Papers 04-01, Utrecht School of Economics.
  11. Paul Flatau & Matt Forbes & Patric H. Hendershott, 2003. "Homeownership and Unemployment: The Roles of Leverage and Public Housing," NBER Working Papers 10021, National Bureau of Economic Research, Inc.
  12. Coulson, N Edward & Laing, Derek & Wang, Ping, 2001. "Spatial Mismatch in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 949-72, October.
  13. Pablo Casas-Arce & Albert Saiz, 2006. "Owning versus leasing: do courts matter?," Working Papers 06-21, Federal Reserve Bank of Philadelphia.
  14. Chan, Sewin, 2001. "Spatial Lock-in: Do Falling House Prices Constrain Residential Mobility?," Journal of Urban Economics, Elsevier, vol. 49(3), pages 567-586, May.
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