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House prices and employment reallocation: international evidence

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Author Info

  • Olympia Bover

    ()
    (Banco de España
    Institute for Fiscal Studies (IFS)
    Institute for the Study of Labor (IZA)
    Centre for Economic Policy Research (CEPR))

  • Juan F. Jimeno

    ()
    (Banco de España
    Centre for Economic Policy Research (CEPR)
    Institute for the Study of Labor (IZA))

Abstract

Over the last decade house prices increased remarkably in many countries. However, while in several countries there was an employment boom in the construction sector, in others the share of employment in this sector did not significantly change. In this paper we estimate a model of labor demand in the construction sector, featuring building constraints, which explains many of the international differences in the response of sectoral reallocation of employment to house prices. Countries with more building possibilities (Spain, Sweden and the US) have a high sectoral reallocation of employment, and display larger elasticities of labor demand in the construction sector with respect to house prices than countries that seem to have fewer building possibilities (Belgium, the Netherlands, and the UK). Nevertheless, our estimates imply that, for the whole economy, the elasticity of labor demand with respect to house prices is broadly similar across countries.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0705e.pdf
File Function: First version, March 2007
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0705.

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Length: 42 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:bde:wpaper:0705

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Keywords: house prices; labor demand; sectoral reallocation of labor;

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  1. Pietro Catte & Nathalie Girouard & Robert W.R. Price & Christophe André, 2004. "Housing Markets, Wealth and the Business Cycle," OECD Economics Department Working Papers 394, OECD Publishing.
  2. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
  3. Nathalie Girouard & Sveinbjörn Blöndal, 2001. "House Prices and Economic Activity," OECD Economics Department Working Papers 279, OECD Publishing.
  4. Olympia Bover, 2005. "Wealth effects on consumption: microeconometric estimates from the Spanish survey of household finances," Banco de Espa�a Working Papers 0522, Banco de Espa�a.
  5. Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
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Cited by:
  1. Balázs Égert & Rafal Kierzenkowski, 2010. "Exports and Property Prices in France: Are They Connected?," OECD Economics Department Working Papers 759, OECD Publishing.
  2. Rafal Kierzenkowski, 2009. "The Challenge of Restoring French Competitiveness," OECD Economics Department Working Papers 720, OECD Publishing.

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