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

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  • Peter Rupert

    (Department of economics (UCSB))

  • Etienne Wasmer

    (Département d'économie)

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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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/5l6uh8ogmqildh09h48256647.

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Date of creation: 17 May 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/5l6uh8ogmqildh09h48256647

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References

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  1. Peter Rupert, Elena Stancanelli, Etienne Wasmer, 2009. "Commuting, Wages and Bargaining Power," THEMA Working Papers 2009-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. 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.
  3. Gaumont D. & Schindler M. & Wright R., 2005. "“Alternative Theories of Wage Dispersion”," Working Papers ERMES 0505, ERMES, University Paris 2.
  4. 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, vol. 40(3), pages 541-563.
  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 1562, Harvard - Institute of Economic Research.
  6. 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.
  7. 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.
  8. 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.
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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. Damba Lkhagvasuren, 2006. "Education, Mobility and the College Wage Premium," Working Papers 14001, Concordia University, Department of Economics, revised Nov 2013.
  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 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," CEPR Discussion Papers 8152, C.E.P.R. Discussion Papers.
  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. 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.
  6. 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).
  7. Taskin, A. A. & Yaman, F., 2013. "Homeownership and Unemployment Duration," Working Papers 13/04, Department of Economics, City University London.
  8. Bonilla, Roberto & Kiraly, Francis, 2013. "Marriage wage premium in a search equilibrium," Labour Economics, Elsevier, vol. 24(C), pages 107-115.
  9. 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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