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House Prices, Geographical Mobility, and Unemployment

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  • Marcus Moelbak Ingholt

    (Department of Economics, University of Copenhagen)

Abstract

Geographical mobility correlates positively with house prices and negatively with unemployment over the U.S. business cycle. I present a DSGE model in which declining house prices and tight credit conditions impede the mobility of indebted workers. This reduces the workers' cross-area competition for jobs, causing wages and unemployment to rise. A Bayesian estimation shows that this channel more than quadruples the response of unemployment to adverse housing market shocks. The estimation also shows that adverse housing market shocks caused the decline in mobility during the Great Recession. Absent this decline, the unemployment rate would have been 0.5 p.p. lower.

Suggested Citation

  • Marcus Moelbak Ingholt, 2017. "House Prices, Geographical Mobility, and Unemployment," Discussion Papers 17-06, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:1706
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    References listed on IDEAS

    as
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    1. House Prices, Geographical Mobility, and Unemployment
      by Christian Zimmermann in NEP-DGE blog on 2017-05-17 05:22:37

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    More about this item

    Keywords

    Refinancing collateral constraint; Geographical mobility; Wage setting; DSGE model;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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