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

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Author Info

  • Rupert, Peter

    ()
    (University of California, Santa Barbara)

  • Wasmer, Etienne

    ()
    (Sciences Po, Paris)

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 US 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 US and Europe.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4172.

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Length: 39 pages
Date of creation: May 2009
Date of revision:
Publication status: published in: Journal of Monetary Economics, Carnegie-NYU-Rochester Conference Issue, 2012, 59 (1), 24-36
Handle: RePEc:iza:izadps:dp4172

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Related research

Keywords: labor search frictions; unemployment; housing market imperfections; commuting costs;

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References

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  1. Gaumont, Damien & Schindler, Martin & Wright, Randall, 2006. "Alternative theories of wage dispersion," European Economic Review, Elsevier, vol. 50(4), pages 831-848, May.
  2. Rogers, Cynthia L., 1997. "Job Search and Unemployment Duration: Implications for the Spatial Mismatch Hypothesis," Journal of Urban Economics, Elsevier, vol. 42(1), pages 109-132, July.
  3. Ommeren, Jos van & Berg, Gerard J. van den & Gorter, Cees, 1998. "Estimating the marginal willingness to pay for commuting," Serie Research Memoranda 0046, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  4. Peter RUPPERT & Elena STANCANELLI & Etienne WASMER, 2009. "Commuting, Wages and Bargaining Power," Annales d'Economie et de Statistique, ENSAE, issue 95-96, pages 201-220.
  5. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  6. Zax, Jeffrey S & Kain, John F, 1996. "Moving to the Suburbs: Do Relocating Companies Leave Their Black Employees Behind?," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 472-504, July.
  7. Wasmer, Etienne & Zenou, Yves, 2002. "Does City Structure Affect Job Search and Welfare?," Journal of Urban Economics, Elsevier, vol. 51(3), pages 515-541, May.
  8. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
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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. Samuel Bentolila & Pierre Cahuc & Juan J. Dolado & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets In The Great Recession: France Vs. Spain," Working Papers wp2010_1009, CEMFI.
  2. Lkhagvasuren, Damba, 2014. "Education, mobility and the college wage premium," European Economic Review, Elsevier, vol. 67(C), pages 159-173.
  3. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, vol. 24(C), pages 107-115.
  4. Lehmann, Etienne & Montero Ledezma, Paola L. & Van der Linden, Bruno, 2013. "Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions," IZA Discussion Papers 7828, Institute for the Study of Labor (IZA).
  5. 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 846, OECD Publishing.
  6. Allen Head & Huw Lloyd-Ellis, 2012. "Housing Liquidity, Mobility, and the Labour Market," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1559-1589.
  7. Taskin, A. A. & Yaman, F., 2013. "Homeownership and Unemployment Duration," Working Papers 13/04, Department of Economics, City University London.
  8. Janiak, Alexandre, 2013. "Structural unemployment and the costs of firm entry and exit," Labour Economics, Elsevier, vol. 23(C), pages 1-19.

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  1. Economic Logic blog

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