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Homeownership, Unemployment and Commuting Distances

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  • Yuval Kantor

    (VU University Amsterdam)

  • Peter Nijkamp

    (VU University Amsterdam)

  • Jan Rouwendal

    (VU University Amsterdam)

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    Abstract

    More than a decade ago Oswald has formulated the thesis that homeownership increases unemployment. Empirical research on micro data has confirmed that unemployed homeowners are less inclined to move house in combination with accepting a new job elsewhere. However, in general for European countries, residential mobility associated with unemployment spells appears to be too small to be able to have a substantial impact on labour market outcomes. The present paper aims to make a new contribution to the scientific debate on Oswald’s thesis by addressing two complementary issues: risk attitudes of job seekers and commuting costs. We show that decreasing absolute risk aversion implies that the exit rate from unemployment is increasing in housing cost in the context of a standard job search model. In a spatial setting this is shown to imply that higher housing costs increase average commuting distances as well. We test these predictions on Dutch register data. Our empirical results show that outright homeowners have lower exit rates from unemployment than renters and are more reluctant to accept long commutes, which confirms Oswald’s thesis. However, highly leveraged homeowners have higher exit rates than renters and are more inclined to accept longer commutes, which confirms earlier findings in the literature.

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    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 13-144/VI.

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    Date of creation: 19 Sep 2013
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    Handle: RePEc:dgr:uvatin:20130144

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    Related research

    Keywords: homeownership; unemployment duration; spatial labour markets;

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    References

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    1. Rouwendal, Jan, 1999. "Spatial job search and commuting distances," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 29(4), pages 491-517, July.
    2. van den Berg, Gerard J & Gorter, Cees, 1997. "Job Search and Commuting Time," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 15(2), pages 269-81, April.
    3. Pierre-André Chiappori & Monica Paiella, 2008. "Relative Risk Aversion Is Constant: Evidence from Panel Data," Discussion Papers, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy 5_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    4. Munch, Jakob R. & Rosholm, Michael & Svarer, Michael, 2003. "Are Home Owners Really More Unemployed?," IZA Discussion Papers 872, Institute for the Study of Labor (IZA).
    5. M. van Leuvensteijn & Pierre Koning, 2004. "The Effect of Home-ownership on Labor Mobility in The Netherlands," Working Papers, Utrecht School of Economics 04-01, Utrecht School of Economics.
    6. Svarer, Michael & Rosholm, Michael & Munch, Jakob Roland, 2005. "Rent control and unemployment duration," Journal of Public Economics, Elsevier, Elsevier, vol. 89(11-12), pages 2165-2181, December.
    7. Harminder Battu & Ada Ma & Euan Phimister, 2008. "Housing Tenure, Job Mobility and Unemployment in the UK," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 118(527), pages 311-328, 03.
    8. 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.
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