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The Impact of Employment on Housing Prices: Detailed Evidence from FDI in Ireland

Author

Listed:
  • Kerri Agnew

    (Department of Economics, Trinity College Dublin)

  • Ronan Lyons

    (Department of Economics, Trinity College Dublin)

Abstract

Access to employment is one of the most valuable amenities offered by cities. In urban economics, this is the principal driver of the bid-rent gradient and is a key determinant of housing prices and land values. However, little is known about the causal effect of employment on housing prices, due to the problem of identification. This study presents the first causal estimates of employment changes on housing prices, both sales and rental. It does this by using a purpose-built spatially granular dataset of 1.4 million housing prices and FDI employment, covering Ireland 2007-2013. Identification rests on a combination of rich spatio-temporal variation due to the abundance of FDI in Ireland, a rich set of location controls and an inelastic housing supply in the period covered. The main results show that 1-2 years after 1,000 extra jobs have been created, monthly rents in nearby properties will be between 0.5% and 1% higher. The effect on prices is at least 2% but less consistent across specifications. On average, net job creation in export-oriented FDI firms 2009-2013 added roughly 48 million to the stock of wealth of owner occupied real estate and 8 million to the stock of wealth of the rental sector. We also estimate that the aggregate effect of the stock of FDI jobs in 2013 on Irish housing prices is 440 million, or just over 1%.

Suggested Citation

  • Kerri Agnew & Ronan Lyons, 2017. "The Impact of Employment on Housing Prices: Detailed Evidence from FDI in Ireland," Trinity Economics Papers tep0417, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep0417
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    File URL: https://www.tcd.ie/Economics/TEP/2017/TEP0417.pdf
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    2. Raul-Tomas Mora-Garcia & Maria-Francisca Cespedes-Lopez & V. Raul Perez-Sanchez & Pablo Marti & Juan-Carlos Perez-Sanchez, 2019. "Determinants of the Price of Housing in the Province of Alicante (Spain): Analysis Using Quantile Regression," Sustainability, MDPI, vol. 11(2), pages 1-33, January.
    3. Patricia Abelairas-Etxebarria & Inma Astorkiza, 2020. "Space-Time Analysis of Migrations, Employment, and Housing as A Basis for Municipal Sustainable Urban Planning," Sustainability, MDPI, vol. 12(6), pages 1-13, March.
    4. Hu, Lirong & He, Shenjing & Han, Zixuan & Xiao, He & Su, Shiliang & Weng, Min & Cai, Zhongliang, 2019. "Monitoring housing rental prices based on social media:An integrated approach of machine-learning algorithms and hedonic modeling to inform equitable housing policies," Land Use Policy, Elsevier, vol. 82(C), pages 657-673.
    5. Maria Jose Doval Tedin & Violaine Faubert, 2020. "Housing Affordability in Ireland," European Economy - Economic Briefs 061, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Sofia Vale & Felipa de Mello-Sampayo, 2021. "Effect of Hierarchical Parish System on Portuguese Housing Rents," Sustainability, MDPI, vol. 13(2), pages 1-17, January.
    7. Cespedes-Lopez, Maria-Francisca & Perez-Sanchez, V. Raul & Mora-Garcia, Raul-Tomas, 2022. "The influence of housing location on energy ratings price premium in Alicante, Spain," Ecological Economics, Elsevier, vol. 201(C).

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    More about this item

    Keywords

    Housing Prices; Employment; Foreign Direct Investment; Ireland; Hedonic Regression;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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