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Adjustment in Local Labour and Housing Markets

Author

Listed:
  • Arthur Grimes

    () (Motu Economic and Public Policy Research)

  • David C. Maré

    () (Motu Economic and Public Policy Research)

  • Melanie Morten

    () (Motu Economic and Public Policy Research)

Abstract

This paper analyses local labour and hosuing market adjustment in New Zealand from 1989 to 2006. We use a VAR approach to examine the adjustment of employment, employment rate, participation rate, wages, and house prices in response to employment shocks. Migration is a major adjustment response at both a national and regional level. Nationally, a 1% positive employment shock leads to a long-run level of employment 1.3% higher, with half of the extra jobs filled by migrants. A 1% region-specific employment shock raises the long-run regional share of employment by 0.5 percentage points, due entirely to in-migration. House price responses differ at different spatial scales. Nationally, house prices are very responsive to employment shocks: a 1% employment shock raising long run house prices by 6% , as may be expected with an upward sloping housing supply curve. Paradoxically, this relationship does not hold at the regional level.

Suggested Citation

  • Arthur Grimes & David C. Maré & Melanie Morten, 2007. "Adjustment in Local Labour and Housing Markets," Working Papers 07_10, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:07_10
    as

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    File URL: http://motu-www.motu.org.nz/wpapers/07_10.pdf
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    References listed on IDEAS

    as
    1. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    2. David C. Maré & Jason Timmins, 2003. "Moving to Jobs?," Working Papers 03_07, Motu Economic and Public Policy Research.
    3. Arthur Grimes & Andrew Aitken, 2004. "What's the Beef with House Prices? Economic Shocks and Local Housing Markets," Working Papers 04_08, Motu Economic and Public Policy Research.
    4. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 1-76.
    5. repec:cup:macdyn:v:5:y:2001:i:1:p:81-100 is not listed on IDEAS
    6. Vesa Kanniainen & Jan Södersten, "undated". "On Financial Adjustment and Investment Booms: Lessons from Tax Reforms," EPRU Working Paper Series 95-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    7. Paolo Mauro & Antonio Spilimbergo, 1999. "How Do the Skilled and the Unskilled Respond to Regional Shocks?: The Case of Spain," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 1-1.
    8. Benkwitz, Alexander & L tkepohl, Helmut & Wolters, J rgen, 2001. "Comparison Of Bootstrap Confidence Intervals For Impulse Responses Of German Monetary Systems," Macroeconomic Dynamics, Cambridge University Press, pages 81-100.
    9. David C. Maré & Jason Timmins, 2003. "Moving to Jobs?," Working Papers 03_07, Motu Economic and Public Policy Research.
    10. Love, Inessa & Zicchino, Lea, 2002. "Financial development and dynamic investment behavior : evidence from panel vector autoregression," Policy Research Working Paper Series 2913, The World Bank.
    11. Mark J. Holmes & Arthur Grimes, 2005. "Is there long-run convergence of regional house prices in the UK?," Working Papers 05_11, Motu Economic and Public Policy Research.
    12. Arthur Grimes & David C. Maré & Melanie Morten, 2006. "Defining Areas: Linking Geographic Data in New Zealand," Working Papers 06_07, Motu Economic and Public Policy Research.
    13. Fredriksson, Peter, 1999. "The Dynamics of Regional Labor Markets and Active Labor Market Policy: Swedish Evidence," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 623-648, October.
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    Citations

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    Cited by:

    1. Steven Stillman & David C. Maré, 2008. "Housing Markets and Migration: Evidence from New Zealand," Working Papers 08_06, Motu Economic and Public Policy Research.
    2. Julie Fry, 2014. "Migration and Macroeconomic Performance in New Zealand: Theory and Evidence," Treasury Working Paper Series 14/10, New Zealand Treasury.
    3. Steven Stillman & Malathi Velamuri, 2008. "The Long-Run Impact of New Zealand's Structural Reform on Local Communities," Working Papers 08_11, Motu Economic and Public Policy Research.
    4. Stillman, Steven & Velamuri, Malathi & Aitken, Andrew, 2010. "The long-run impact of New Zealand's structural reform on local communities," Journal of Comparative Economics, Elsevier, pages 432-448.
    5. Christian Dustmann & Albrecht Glitz & Tommaso Frattini, 2008. "The labour market impact of immigration," Oxford Review of Economic Policy, Oxford University Press, pages 478-495.

    More about this item

    Keywords

    Regional Labour Market Adjustment; Internal Migration; House Prices; Vector Autoregression;

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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