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House Prices, Wealth Effects and Labour Supply

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  • Richard Disney
  • John Gathergood

Abstract

We examine the impact of housing wealth on labour supply using exogenous local variations in house prices and household panel data for Britain. Our analysis controls for variations in local labour demand and income expectations which might co-determine house prices and labour supply. We find significant effects of house price variations on labour supply, consistent with leisure being a normal good. Labour supply is particularly sensitive to house prices among the young and older men. Our findings imply that housing wealth losses may have contributed to the unexpectedly high rates of labour market activity in Britain during the Great Recession.

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Bibliographic Info

Paper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 13/02.

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Date of creation: Feb 2013
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Handle: RePEc:not:notecp:13/02

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/
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Keywords: Labour supply; Wealth effects; House prices JEL codes: E51; E52; F31; F33;

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References

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  1. Richard Disney & John Gathergood & Andrew Henley, 2010. "House Price Shocks, Negative Equity, and Household Consumption in the United Kingdom," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1179-1207, December.
  2. Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers 562, Princeton University, Department of Economics, Industrial Relations Section..
  3. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, 02.
  4. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
  5. Michael F. Lovenheim & Kevin J. Mumford, 2013. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 464-475, May.
  6. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  7. Ing-Haw Cheng & Eric French, 2000. "The effect of the run-up in the stock market on labor supply," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 48-65.
  8. Richard Blundell & Mike Brewer & Marco Francesconi, 2008. "Job Changes and Hours Changes: Understanding the Path of Labor Supply Adjustment," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 421-453, 07.
  9. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
  10. Michael F. Lovenheim, 2011. "The Effect of Liquid Housing Wealth on College Enrollment," Journal of Labor Economics, University of Chicago Press, vol. 29(4), pages 741 - 771.
  11. Jeffrey R. Brown & Courtney C. Coile & Scott J. Weisbenner, 2006. "The Effect of Inheritance Receipt on Retirement," NBER Working Papers 12386, National Bureau of Economic Research, Inc.
  12. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, vol. 91(4), pages 778-794, September.
  13. Atif R. Mian & Amir Sufi, 2009. "House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis," NBER Working Papers 15283, National Bureau of Economic Research, Inc.
  14. Martin Farnham & Purvi Sevak, 2007. "Housing Wealth and Retirement Timing," Working Papers wp172, University of Michigan, Michigan Retirement Research Center.
  15. Michael Lovenheim & Kevin Mumford, 2010. "Do Family Wealth Shocks Affect Fertility Choices? Evidence from the Housing Market Boom and Bust," Discussion Papers 09-004, Stanford Institute for Economic Policy Research.
  16. Richard Disney & John Gathergood, . "Housing Wealth, Liquidity Constraints and Self-Employment," Discussion Papers 08/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
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  1. Increasing House Values Playing Significant Role in Wealth Recovery
    by ? in St. Louis Fed On the Economy on 2014-06-30 10:00:06

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