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Housing Liquidity, Mobility, and the Labour Market

  • Allen Head

    ()

    (Queen's University)

  • Huw Lloyd-Ellis

    ()

    (Queen's University)

We study the interactions among geographical mobility, unemployment and home-ownership in an economy with heterogeneous locations, endogenous construction and search frictions in the markets for both labour and housing. The decision of home-owners to accept job offers from other cities depends on how quickly they can sell their houses (i.e. their liquidity), which in turn depends on local labour market conditions. Consequently, home-owners accept job offers from other cities at a lower rate than do renters, generating a link between home-ownership and aggregate unemployment. When calibrated to match aggregate U.S. statistics on mobility, housing and labour flows, our model predicts that the effect of home-ownership on aggregate unemployment is small. When unemployment is high, however, changes in the rate of home-ownership can have economically significant effects.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1197.pdf
File Function: First version 2011
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1197.

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Length: 63 pages
Date of creation: Aug 2011
Date of revision:
Publication status: Forthcoming in Review of Economic Studies
Handle: RePEc:qed:wpaper:1197
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  1. Richard K. Green & Patric H. Hendershott, 1999. "Home Ownership and Unemployment in the U.S," Wisconsin-Madison CULER working papers 99-15, University of Wisconsin Center for Urban Land Economic Research.
  2. Rupert, Peter & Wasmer, Etienne, 2009. "Housing and the Labor Market: Time to Move and Aggregate Unemployment," University of California at Santa Barbara, Economics Working Paper Series qt1bv529kn, Department of Economics, UC Santa Barbara.
  3. Coulson, N. Edward & Fisher, Lynn M., 2009. "Housing tenure and labor market impacts: The search goes on," Journal of Urban Economics, Elsevier, vol. 65(3), pages 252-264, May.
  4. Jan Rouwendal & Peter Nijkamp, 2010. "Homeownership and labour-market behaviour: interpreting the evidence," Environment and Planning A, Pion Ltd, London, vol. 42(2), pages 419-433, February.
  5. Henry G. Overman & Yannis Ioannides, 2000. "Cross sectional evolution of the US city size distribution," LSE Research Online Documents on Economics 20137, London School of Economics and Political Science, LSE Library.
  6. M. van Leuvensteijn & P. Koning, 2004. "The Effect of Home-ownership on Labor Mobility in The Netherlands," Working Papers 04-01, Utrecht School of Economics.
  7. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May.
  8. Munch, Jakob R. & Rosholm, Michael & Svarer, Michael, 2006. "Home Ownership, Job Duration and Wages," IZA Discussion Papers 2110, Institute for the Study of Labor (IZA).
  9. Boheim, Rene & Taylor, Mark P, 2002. "Tied Down or Rome to Move? Investigating the Relationships between Housing Tenure, Employment Status and Residential Mobility in Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(4), pages 369-92, September.
  10. Dohmen, Thomas J., 2005. "Housing, mobility and unemployment," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 305-325, May.
  11. Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
  12. Denice DiPasquale & Edward L. Glaeser, 1997. "Incentives and Social Capital: Are Homeowners Better Citizens?," Harvard Institute of Economic Research Working Papers 1815, Harvard - Institute of Economic Research.
  13. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, 05.
  14. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
  15. Michael Svarer & Michael Rosholm & Jacob Roland Munch, 2003. "Are Home Owners Really more Unemployed?," CAM Working Papers 2003-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
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