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

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References

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  1. 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.
  2. Damien Gaumont & Martin Schindler & Randall Wright, 2005. "Alternative Theories of Wage Dispersion," PIER Working Paper Archive, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 05-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. 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.
  4. Peter Rupert, Elena Stancanelli, Etienne Wasmer, 2009. "Commuting, Wages and Bargaining Power," THEMA Working Papers, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise 2009-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  5. 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.
  6. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  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. 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.
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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. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, Elsevier, vol. 24(C), pages 107-115.
  2. 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.
  3. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," IZA Discussion Papers 5340, Institute for the Study of Labor (IZA).
  4. 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.
  5. Lkhagvasuren, Damba, 2014. "Education, mobility and the college wage premium," European Economic Review, Elsevier, Elsevier, vol. 67(C), pages 159-173.
  6. Janiak, Alexandre, 2013. "Structural unemployment and the costs of firm entry and exit," Labour Economics, Elsevier, Elsevier, vol. 23(C), pages 1-19.
  7. 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).
  8. 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.
  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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