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Housing and the Labor Market: Time to Move and Aggregate Unemployment

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  • Rupert, Peter
  • Wasmer, Etienne

Abstract

The Mortensen-Pissarides model with unemployment benefits and taxes has been able to account for the variation in unemployment rates across countries but does not explain why geographical mobility is very low in some countries (on average, three times lower in Europe than in the U.S.). We build a model in which both unemployment and mobility rates are endogenous. Our findings indicate that an increase in unemployment benefits and in taxes does not generate a strong decline in mobility and accounts for only half to two-thirds of the difference in unemployment from the U.S. to Europe. We find that with higher commuting costs the effect of housing frictions plays a large role and can generate a substantial decline in mobility. We show that such frictions can account for the differences in unemployment and mobility between the U.S. and Europe.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt1bv529kn.

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Date of creation: 01 Oct 2009
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Handle: RePEc:cdl:ucsbec:qt1bv529kn

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Keywords: commuting; search model; Social and Behavioral Sciences;

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References

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  1. Edward C. Prescott, 2003. "Why do Americans work so much more than Europeans?," Staff Report, Federal Reserve Bank of Minneapolis 321, Federal Reserve Bank of Minneapolis.
  2. Rupert, Peter & Stancanelli, Elena G. F. & Wasmer, Etienne, 2009. "Commuting, Wages and Bargaining Power," IZA Discussion Papers 4510, Institute for the Study of Labor (IZA).
  3. Gaumont D. & Schindler M. & Wright R., 2005. "“Alternative Theories of Wage Dispersion”," Working Papers ERMES, ERMES, University Paris 2 0505, ERMES, University Paris 2.
  4. Zax, J.S. & Kain, J.F., 1991. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1562, Harvard - Institute of Economic Research.
  5. Rogers, Cynthia L., 1997. "Job Search and Unemployment Duration: Implications for the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, Elsevier, vol. 42(1), pages 109-132, July.
  6. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  7. Wasmer, Etienne & Zenou, Yves, 2002. "Does City Structure Affect Job Search and Welfare?," Journal of Urban Economics, Elsevier, Elsevier, vol. 51(3), pages 515-541, May.
  8. Jos van Ommeren & Gerard J. van den Berg & Cees Gorter, 2000. "Estimating the Marginal Willingness to Pay for Commuting," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 40(3), pages 541-563.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Explaining high unemployment and low mobility in Europe
    by Economic Logician in Economic Logic on 2009-08-05 14:30:00
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Cited by:
  1. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8152, C.E.P.R. Discussion Papers.
  2. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, Elsevier, vol. 24(C), pages 107-115.
  3. Etienne LEHMANN & Paola L. MONTERO LEDEZMA & Bruno VAN DER LINDEN, 2013. "Inefficient equilibrium unemployment in a duocentric economy with matching frictions," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2013033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Allen Head & Huw Lloyd-Ellis, 2011. "Housing Liquidity, Mobility, and the Labour Market," Working Papers, Queen's University, Department of Economics 1197, Queen's University, Department of Economics.
  5. Lkhagvasuren, Damba, 2014. "Education, mobility and the college wage premium," European Economic Review, Elsevier, Elsevier, vol. 67(C), pages 159-173.
  6. Li Gan & Qinghua Zhang, 2013. "Market Thickness and the Impact of Unemployment on Housing Market Outcomes," NBER Working Papers 19564, National Bureau of Economic Research, Inc.
  7. Aida Caldera Sánchez & Dan Andrews, 2011. "To Move or not to Move: What Drives Residential Mobility Rates in the OECD?," OECD Economics Department Working Papers, OECD Publishing 846, OECD Publishing.
  8. Janiak, Alexandre, 2013. "Structural unemployment and the costs of firm entry and exit," Labour Economics, Elsevier, Elsevier, vol. 23(C), pages 1-19.
  9. Taskin, A. A. & Yaman, F., 2013. "Homeownership and Unemployment Duration," Working Papers, Department of Economics, City University London 13/04, Department of Economics, City University London.

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