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The Effect of Homeownership on Geographic Mobility and Labor Market Outcomes

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  • Hernan Winkler

    (UCLA)

Abstract

This paper examines the effect of homeownership on mobility and labor income and provides new evidence that owning a home makes workers less likely to move in response to labor market shocks. To identify this effect, I develop and estimate a structural dynamic model of housing choices, migration decisions and labor market outcomes. I find that owning a home has a large negative effect on the probability of moving in response to a labor market shock and a small negative effect on labor income. Owners suffering from a decrease in home equity are 40 percent less mobile. I conduct two policy experiments. The first shows that the home mortgage deduction has a positive effect on homeownership, affects mobility and creates an incentive to buy larger houses. Second, I find that if the down payment requirement for buying a home is eliminated, homeownership exhibits a large increase, while the mobility and labor income of households experiencing negative labor market shocks decrease.

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File URL: http://www.economicdynamics.org/meetpapers/2011/paper_196.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 196.

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Date of creation: 2011
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Handle: RePEc:red:sed011:196

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  1. Greg Kaplan, 2010. "Moving back home: insurance against labor market risk," Staff Report, Federal Reserve Bank of Minneapolis 449, Federal Reserve Bank of Minneapolis.
  2. Quigley, John M., 2002. "Transactions Costs and Housing Markets," Berkeley Program on Housing and Urban Policy, Working Paper Series, Berkeley Program on Housing and Urban Policy qt6pz8p6zt, Berkeley Program on Housing and Urban Policy.
  3. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 43, pages 255-296, 03.
  4. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
  5. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, National Bureau of Economic Research, Inc, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
  6. Vigdor, Jacob L., 2006. "Liquidity constraints and housing prices: Theory and evidence from the VA Mortgage Program," Journal of Public Economics, Elsevier, Elsevier, vol. 90(8-9), pages 1579-1600, September.
  7. Hanushek, Eric A & Quigley, John M, 1980. "What Is the Price Elasticity of Housing Demand?," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 449-54, August.
  8. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 475, University of Warwick, Department of Economics.
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Cited by:
  1. Siddharth Kothari & Itay Saporta Eksten & Edison Yu, 2013. "The (Un)importance of Geographical Mobility in the Great Recession"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 553-563, July.
  2. Bulent Guler, 2013. "Dual Income Couples and Interstate Migration," 2013 Meeting Papers, Society for Economic Dynamics 898, Society for Economic Dynamics.
  3. Bachmann, Rudiger & Cooper, Daniel, 2014. "The ins and arounds in the U.S. housing market," Working Papers, Federal Reserve Bank of Boston 14-3, Federal Reserve Bank of Boston.
  4. Kyle F. Herkenhoff & Lee E. Ohanian, 2011. "Labor Market Dysfunction During the Great Recession," NBER Working Papers 17313, National Bureau of Economic Research, Inc.

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