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Mortgage market, housing tenure choice and unemployment

Listed author(s):
  • Gaetano Lisi

    ()

    (Centro di Analisi Economica CREAtività e Motivazioni)

Abstract Following the evidence that housing costs may impair the proper functioning of the labour market, this paper develops a search and matching model where trading frictions in the mortgage, housing and labour markets interact with each other. Precisely, the employment status affects the probability to get a mortgage. In turn, the granting or not of the mortgage affects the housing tenure choice (tenancy or owner occupancy). Finally, the housing tenure choice affects the unemployment rate. It will show that tenants generate a greater effort in searching for a job than homeowners, since employed workers have a greater chance of getting a mortgage to buy a home. As a result, the positive correlation between the homeownership and unemployment rates emerges as quite consistent with the evidence that homeowners tend to be unemployed less often than tenants.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2015-05.pdf
File Function: Fisrt version / Primera version, 2015
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2015-05.

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Length: 1 pages
Date of creation: Mar 2015
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2015-05
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