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Housing Liquidity, Mobility, and the Labour Market

  • Allen Head
  • Huw Lloyd-Ellis

We study the interactions among geographical mobility, unemployment, and home-ownership in an economy with heterogeneous locations, endogenous construction, and search frictions in the markets for both labour and housing. The decision of home-owners to accept job offers from other cities depends on how quickly they can sell their houses (i.e. the houses' liquidity), which in turn depends on local labour market conditions. Consequently, home-owners accept job offers from other cities at a lower rate than do renters, generating a link between home-ownership and unemployment both at the city level and in the aggregate. When calibrated to match aggregate U.S. statistics on mobility, housing, and labour flows, the model predicts that the effect of home-ownership on aggregate unemployment is small. When unemployment is high, however, changes in the rate of home-ownership can have economically significant effects. Copyright , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/restud/rds004
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Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 4 ()
Pages: 1559-1589

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Handle: RePEc:oup:restud:v:79:y:2012:i:4:p:1559-1589
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  1. Richard K. Green & Patric H. Hendershott, 1999. "Home Ownership and Unemployment in the U.S," Wisconsin-Madison CULER working papers 99-15, University of Wisconsin Center for Urban Land Economic Research.
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  3. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, 2008. "Home ownership, job duration, and wages," Journal of Urban Economics, Elsevier, vol. 63(1), pages 130-145, January.
  4. Jan Rouwendal & Peter Nijkamp, 2007. "Homeownership and Labour Market Behaviour: Interpreting the Evidence," Tinbergen Institute Discussion Papers 07-047/3, Tinbergen Institute, revised 03 Nov 2008.
  5. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, . "Are Home Owners Really More Unemployed?," Economics Working Papers 2003-15, Department of Economics and Business Economics, Aarhus University.
  6. Dohmen, Thomas J., 2005. "Housing, mobility and unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 305-325, May.
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  8. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
  9. Y Ioannides & Henry Overman, 2000. "Cross Sectional Evolution of the US City Size Distribution," CEP Discussion Papers dp0483, Centre for Economic Performance, LSE.
  10. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, 05.
  11. Peter Rupert & Etienne Wasmer, 2009. "Housing and the Labor Market: Time to Move and Aggregate Unemployment," Working Papers hal-00972979, HAL.
  12. Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
  13. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  14. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  15. Boheim, Rene & Taylor, Mark P, 2002. "Tied Down or Rome to Move? Investigating the Relationships between Housing Tenure, Employment Status and Residential Mobility in Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(4), pages 369-92, September.
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