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Migration, housing market, and labor market responses to employment shocks

  • Zabel, Jeffrey E.

One reason for the United States’ economic success is the willingness of its residents to follow jobs. Households’ decisions to move depend not only on job prospects but also on the relative cost of housing. I investigate how the housing market affects the flow of workers across cities. This occurs through at least two channels: the relative mobility of homeowners versus renters, and the relative cost of housing across markets. I use homeownership rates to measure the former, and use an index that measures house prices across metropolitan statistical areas (MSAs) and the price elasticity of housing supply to capture the latter. To show how variation in the these housing market factors not only affects cross-city migration but also the housing and labor markets, I estimate a VAR model of migration, employment, wages, house prices, and new housing supply using annual data from 277 US MSAs for 1990–2006. The response functions based on labor supply and demand shocks show substantial variation when evaluated at different values of the homeownership rate, the price elasticity of housing supply, and relative housing prices. I also allow for spillover effects in the model that reflect the impact of a labor demand shock in the nearest city.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 72 (2012)
Issue (Month): 2 ()
Pages: 267-284

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Handle: RePEc:eee:juecon:v:72:y:2012:i:2:p:267-284
DOI: 10.1016/j.jue.2012.05.006
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