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Search frictions, housing prices and growth

Author

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  • Gaetano Lisi

    (Centro di Analisi Economica CREAtività e Motivazioni)

Abstract

Rising house prices have a positive impact on real GDP through the consumption effect and the construction of new houses (housing investment). Basically, the strength of this positive effect relies on a large share of homeowners (especially regarding the consumption effect). At the same time, however, a greater share of homeowners could encourage unemployment (the so-called “Oswald hypothesis”), thus damaging economic growth. This theoretical paper includes the link between housing tenure and job-search intensity in the relation between housing prices and growth. The main finding of this work is that homeownership may either reinforce or resize the effect of housing prices on economic growth.

Suggested Citation

  • Gaetano Lisi, 2019. "Search frictions, housing prices and growth," Working Papers. Serie AD 2019-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2019-02
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2019-02.pdf
    File Function: Fisrt version / Primera version, 2019
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    More about this item

    Keywords

    housing prices; new construction; growth; homeownership; search frictions;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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