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Housing market regulation and the social demand for job protection

  • Decreuse, Bruno
  • van Ypersele, Tanguy

Controlling for country fixed effects, there is a positive and statistically significant relationship between the degree of housing market regulation (HMR) and the strictness of employment protection legislation (EPL) in OECD countries. We provide a model in which HMR increases foreclosure costs in case of mortgage default, while EPL raises the administrative cost of dismissal. Owing to banks lending behavior, individuals' demand for job protection increases with the cost of foreclosure. We use the model to discuss social housing and family insurance, the case for mortgage unemployment insurance, regulations on the use of fixed-term contracts, the impact of min down-payment policies, feed-back effects from HMR to EPL, and the failure of a 2006 French reform of the labor contracts.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7845.

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Date of creation: Jun 2010
Handle: RePEc:cpr:ceprdp:7845
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