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Housing, Wages and UK Labour Markets

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  • Bover, Olympia
  • Muellbauer, John
  • Murphy, Anthony

Abstract

There is a considerable literature concerning the effects on labor mobility of imperfections in United Kingdom markets for rented housing (such as the 1987 book by Minford et al. and several articles by Hughes and McCormick). This paper examines the interaction of labor and housing markets, including the owner-occupied sector, in a more general framework. Our analysis has implications for the behavior of aggregate wages in the UK and for the relationship between aggregate unemployment and unfilled vacancies, which in part reflects mismatch between jobs and people. Our empirical analysis reveals that lagged values of regional differentials in the ratio of house prices to earnings play an important role in both the wage and the unemployment/vacancies equations. In addition, lagged values of average house prices have a significant 'cost-of-living' effect on wages. Our evidence is consistent with cross-sectional evidence on the effects of tenure structure on mobility; we find some effects from the 1965 and 1974 Rent Acts.

Suggested Citation

  • Bover, Olympia & Muellbauer, John & Murphy, Anthony, 1988. "Housing, Wages and UK Labour Markets," CEPR Discussion Papers 268, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:268
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    References listed on IDEAS

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    1. Willem H. Buiter, 1988. "Macroeconomic Policy Design in an Interdependent World Economy: An Analysis of Three Contingencies," NBER Chapters,in: International Aspects of Fiscal Policies, pages 121-172 National Bureau of Economic Research, Inc.
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    4. Edison, Hali J. & Miller, Marcus H. & Williamson, John, 1987. "On evaluating and extending the target zone proposal," Journal of Policy Modeling, Elsevier, vol. 9(1), pages 199-224.
    5. Buiter, Willem H & Miller, Marcus, 1981. "Monetary Policy and International Competitiveness: The Problems of Adjustment," Oxford Economic Papers, Oxford University Press, vol. 33(0), pages 143-175, Supplemen.
    6. Taylor, John B., 1985. "International coordination in the design of macroeconomic policy rules," European Economic Review, Elsevier, vol. 28(1-2), pages 53-81.
    7. Levine, Paul & Currie, David, 1985. "Optimal feedback rules in an open economy macromodel with rational expectations," European Economic Review, Elsevier, vol. 27(2), pages 141-163, March.
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