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House lock and structural unemployment

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  • Robert G. Valletta

Abstract

A recent decline in geographic mobility in the United States may have been caused in part by falling house prices, through the “lock in” effects of financial constraints faced by households whose housing debt exceeds the market value of their home. I analyze the relationship between such “house lock” and the elevated levels and persistence of unemployment during the recent recession and its aftermath, using data that covers the period through the end of 2011. Because house lock will extend job search in the local labor market for homeowners whose home value has declined, I focus on differences in unemployment duration between homeowners and renters across geographic areas differentiated by the severity of the decline in home prices. The empirical analyses rely on microdata from the monthly Current Population Survey (CPS) files and an econometric method that enables the estimation of individual and aggregate covariate effects on completed unemployment durations in “synthetic cohort” (pseudo-panel) data. The estimates indicate the absence of a meaningful house lock effect on unemployment duration.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2012-25.

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Date of creation: 2012
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Handle: RePEc:fip:fedfwp:2012-25
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Find related papers by JEL classification:
  • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
  • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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Cited by:

  1. Chan, Sewin & Haughwout, Andrew F. & Tracy, Joseph, 2015. "How mortgage finance affects the urban landscape," Staff Reports 713, Federal Reserve Bank of New York.
  2. Marco Caliendo & Deborah A. Cobb-Clark & Juliane Hennecke & Arne Uhlendorff, 2016. "Job Search, Locus of Control, and Internal Migration," SOEPpapers on Multidisciplinary Panel Data Research 818, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Bricker, Jesse & Bucks, Brian, 2016. "Negative home equity, economic insecurity, and household mobility over the Great Recession," Journal of Urban Economics, Elsevier, vol. 91(C), pages 1-12.
  4. Hugo Erken & Eric van Loon & Wouter Verbeek, 2015. "Mismatch on the Dutch labour market in the Great Recession," CPB Discussion Paper 303, CPB Netherlands Bureau for Economic Policy Analysis.

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