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Housing Liquidity, Mobility, and the Labour Market

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  • Allen Head
  • Huw Lloyd-Ellis

Abstract

We study the interactions among geographical mobility, unemployment, and home-ownership in an economy with heterogeneous locations, endogenous construction, and search frictions in the markets for both labour and housing. The decision of home-owners to accept job offers from other cities depends on how quickly they can sell their houses (i.e. the houses' liquidity), which in turn depends on local labour market conditions. Consequently, home-owners accept job offers from other cities at a lower rate than do renters, generating a link between home-ownership and unemployment both at the city level and in the aggregate. When calibrated to match aggregate U.S. statistics on mobility, housing, and labour flows, the model predicts that the effect of home-ownership on aggregate unemployment is small. When unemployment is high, however, changes in the rate of home-ownership can have economically significant effects. Copyright , Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 4 ()
Pages: 1559-1589

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Handle: RePEc:oup:restud:v:79:y:2012:i:4:p:1559-1589

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  1. Yannis M. Ioannides & Henry G. Overman, 1999. "Cross-Sectional Evolution of the U.S. City Size Distribution," Discussion Papers Series, Department of Economics, Tufts University 9926, Department of Economics, Tufts University.
  2. Boheim, Rene & Taylor, Mark P, 2002. "Tied Down or Rome to Move? Investigating the Relationships between Housing Tenure, Employment Status and Residential Mobility in Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(4), pages 369-92, September.
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  8. Jan Rouwendal & Peter Nijkamp, 2010. "Homeownership and labour-market behaviour: interpreting the evidence," Environment and Planning A, Pion Ltd, London, vol. 42(2), pages 419-433, February.
  9. Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
  10. Dohmen, Thomas, 2000. "Housing, Mobility and Unemployment," IZA Discussion Papers 210, Institute for the Study of Labor (IZA).
  11. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, 2008. "Home ownership, job duration, and wages," Journal of Urban Economics, Elsevier, vol. 63(1), pages 130-145, January.
  12. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  13. 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.
  14. 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.
  15. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, 05.
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Cited by:
  1. Mika Kortelainen & Tuukka Saarimaa, 2012. "Do homeowners benefit urban neighborhoods? Evidence from housing prices," Working Papers 36, Government Institute for Economic Research Finland (VATT).
  2. Damba Lkhagvasuren & Roy Nitulescu, 2011. "Sectoral Mobility and Unemployment with Heterogeneous Moving Costs," Working Papers 13003, Concordia University, Department of Economics, revised 14 May 2013.
  3. Blanchflower, David G. & Oswald, Andrew J., 2013. "Does High Home-Ownership Impair the Labor Market?," IZA Discussion Papers 7640, Institute for the Study of Labor (IZA).
  4. Allen Head & Huw Lloyd-Ellis & Hongfei Sun, 2012. "Search, Liquidity and the Dynamics of House Prices and Construction," Working Papers 1276, Queen's University, Department of Economics.

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