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Assessing House Price Effects on Unemployment Dynamics

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  • François Geerolf
  • Thomas Grjebine

Abstract

We investigate the causal effect of house price movements on unemployment dynamics. Using a dataset of 34 countries over the last 40 years, we show the large and significant impact of house prices on unemployment fluctuations using property taxes as an instrument for house prices. A 10% (instrumented) appreciation in house prices yields to a 3.4% decrease in the unemployment rate. These results are very robust to the inclusion of the variables commonly used to explain unemployment rate developments. If house prices directly impact employment in construction, job volatility in this sector resulting in large employment fluctuations, they impact also total employment through their effects on non-residential investment and consumption, two determinants of labour demand. Housing booms have a specific effect on employment in the tradable sector as they lead to real exchange rate appreciations that affect manufacturing activity.

Suggested Citation

  • François Geerolf & Thomas Grjebine, 2014. "Assessing House Price Effects on Unemployment Dynamics," Working Papers 2014-25, CEPII research center.
    • Handle: RePEc:cii:cepidt:2014-25
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    References listed on IDEAS

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    Cited by:

    1. Teodora Cristina Barbu & Mariana Vu?a & Adina Ionela Strachinaru & Sorin Iulian Cioaca, 2017. "An Assessment of the Immigration Impact on the International Housing Price," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 19(46), pages 682-682, August.
    2. Miroslav Plasil, 2021. "Designing Macro-Financial Scenarios: The New CNB Framework and Satellite Models for Property Prices and Credit," Research and Policy Notes 2021/01, Czech National Bank, Research and Statistics Department.

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    More about this item

    Keywords

    Unemployment; House Prices;

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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