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Market thickness and the impact of unemployment on housing market outcomes

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  • Gan, Li
  • Wang, Pengfei
  • Zhang, Qinghua

Abstract

A search-and-matching model is developed to study how unemployment influences the housing market in the presence of the thick-market effect. A structural estimation of the model is conducted based on Texas city-level data that covers three years—1990, 2000 and 2010. Simulations help clarify how much the thick-market effect amplifies the impact of unemployment. A three-percentage-point increase in the unemployment rate lowers the price by 10.74% and reduces the transaction volume by 5.49%. Incorporating a feedback mechanism from housing prices to unemployment strengthens the amplification magnitude of the thick-market effect.

Suggested Citation

  • Gan, Li & Wang, Pengfei & Zhang, Qinghua, 2018. "Market thickness and the impact of unemployment on housing market outcomes," Journal of Monetary Economics, Elsevier, vol. 98(C), pages 27-49.
    • Handle: RePEc:eee:moneco:v:98:y:2018:i:c:p:27-49
    DOI: 10.1016/j.jmoneco.2018.04.007
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    Cited by:

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    2. Michael J. Osei & John V. Winters, 2019. "Labor Demand Shocks and Housing Prices Across the United States: Does One Size Fit All?," Economic Development Quarterly, , vol. 33(3), pages 212-219, August.
    3. Bachmann, Rüdiger & Cooper, Daniel, 2014. "The Ins and Arounds in the U.S. Housing Market," CEPR Discussion Papers 10041, C.E.P.R. Discussion Papers.
    4. Siu Kei Wong & Kuang Kuang Deng & Ka Shing Cheung, 2024. "Starter Home Premium and Housing Affordability," The Journal of Real Estate Finance and Economics, Springer, vol. 68(1), pages 52-73, January.
    5. Rehman, Saira & Moutinho, Nuno & Alves, Jorge, 2020. "The Relationship Between Portuguese Economy Indicators And Housing Prices," Journal of Tourism, Sustainability and Well-being, Cinturs - Research Centre for Tourism, Sustainability and Well-being, University of Algarve, vol. 8(4), pages 270-286.
    6. Xinyi Lyu & Tiaojun Xiao & Jingquan Li, 2024. "Evolution of direct network effects: A perspective of market thickness of an online freight platform," Electronic Markets, Springer;IIM University of St. Gallen, vol. 34(1), pages 1-16, December.
    7. Haydar Karadağ, 2021. "Türkiye Ekonomisinde Bankalar Tarafından Verilen Konut Kredileri, Konut Satışları ve İşsizlik Arasındaki İlişki (2010:Q1-2020:Q3)," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(80), pages 403-422, June.
    8. Álvarez-Román, Laura & García-Posada, Miguel, 2021. "Are house prices overvalued in Spain? A regional approach," Economic Modelling, Elsevier, vol. 99(C).
    9. 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.

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    More about this item

    Keywords

    Housing markets; Unemployment; Thick-market effect; Search-and-matching;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • R - Urban, Rural, Regional, Real Estate, and Transportation Economics

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