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Housing market regulation and the social demand for job protection

  • Bruno Decreuse

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Tanguy Van Ypersele

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

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 HAL in its series Working Papers with number halshs-00481456.

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Date of creation: 06 May 2010
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Handle: RePEc:hal:wpaper:halshs-00481456
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