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The Effect of Homeownership on Geographic Mobility and Labor Market Outcomes

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Listed author(s):
  • Hernan Winkler

    (UCLA)

Abstract

This paper examines the effect of homeownership on mobility and labor income and provides new evidence that owning a home makes workers less likely to move in response to labor market shocks. To identify this effect, I develop and estimate a structural dynamic model of housing choices, migration decisions and labor market outcomes. I find that owning a home has a large negative effect on the probability of moving in response to a labor market shock and a small negative effect on labor income. Owners suffering from a decrease in home equity are 40 percent less mobile. I conduct two policy experiments. The first shows that the home mortgage deduction has a positive effect on homeownership, affects mobility and creates an incentive to buy larger houses. Second, I find that if the down payment requirement for buying a home is eliminated, homeownership exhibits a large increase, while the mobility and labor income of households experiencing negative labor market shocks decrease.

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File URL: https://economicdynamics.org/meetpapers/2011/paper_196.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 196.

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Date of creation: 2011
Handle: RePEc:red:sed011:196
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, 01.
  2. Rosen, Harvey S & Rosen, Kenneth T, 1980. "Federal Taxes and Homeownership: Evidence from Time Series," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 59-75, February.
  3. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
  4. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, 03.
  5. Li, Wenli & Liu, Haiyong & Yao, Rui, 2009. "Housing over time and over the life cycle: a structural estimation," Working Papers 09-7, Federal Reserve Bank of Philadelphia.
  6. Glaeser, Edward L. & Sacerdote, Bruce, 2000. "The Social Consequences of Housing," Journal of Housing Economics, Elsevier, vol. 9(1-2), pages 1-23, March.
  7. Munch, Jakob Roland & Rosholm, Michael & Svarer, Michael, 2008. "Home ownership, job duration, and wages," Journal of Urban Economics, Elsevier, vol. 63(1), pages 130-145, January.
  8. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
  9. Green, Richard K. & White, Michelle J., 1997. "Measuring the Benefits of Homeowning: Effects on Children," Journal of Urban Economics, Elsevier, vol. 41(3), pages 441-461, May.
  10. Patrick Bajari & Phoebe Chan & Dirk Krueger & Daniel Miller, 2013. "A Dynamic Model Of Housing Demand: Estimation And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 409-442, 05.
  11. Donald R. Haurin & Toby L. Parcel & R. Jean Haurin, 2002. "Does Homeownership Affect Child Outcomes?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 635-666.
  12. Vigdor, Jacob L., 2006. "Liquidity constraints and housing prices: Theory and evidence from the VA Mortgage Program," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1579-1600, September.
  13. Michiel van Leuvensteijn & Pierre Koning, 2006. "The Effect of Home-Ownership on Labour Mobility in the Netherlands," Chapters,in: Labour Market Adjustments in Europe, chapter 6 Edward Elgar Publishing.
  14. Ferreira, Fernando & Gyourko, Joseph & Tracy, Joseph, 2010. "Housing busts and household mobility," Journal of Urban Economics, Elsevier, vol. 68(1), pages 34-45, July.
  15. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics.
  16. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
  17. Hanushek, Eric A & Quigley, John M, 1980. "What Is the Price Elasticity of Housing Demand?," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 449-454, August.
  18. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
  19. Quigley, John M., 2002. "Transactions Costs and Housing Markets," Berkeley Program on Housing and Urban Policy, Working Paper Series qt6pz8p6zt, Berkeley Program on Housing and Urban Policy.
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Cited by:

  1. Siddharth Kothari & Itay Saporta Eksten & Edison Yu, 2013. "The (Un)importance of Geographical Mobility in the Great Recession"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 553-563, July.
  2. Florian Oswald, 2015. "Regional Shocks, Migration and Homeownership," 2015 Meeting Papers 759, Society for Economic Dynamics.
  3. Kyle F. Herkenhoff & Lee E. Ohanian, 2011. "Labor Market Dysfunction During the Great Recession," NBER Working Papers 17313, National Bureau of Economic Research, Inc.
  4. Bachmann, Rüdiger & Cooper, Daniel, 2014. "The Ins and Arounds in the U.S. Housing Market," CEPR Discussion Papers 10041, C.E.P.R. Discussion Papers.
  5. Caliendo, Marco & Gielen, Anne C. & Mahlstedt, Robert, 2015. "Home-ownership, unemployed’s job search behavior and post-unemployment outcomes," Economics Letters, Elsevier, vol. 137(C), pages 218-221.
  6. Florian Oswald, 2015. "Regional Shocks, Migration and Homeownership," Sciences Po publications info:hdl:2441/n1d9kd7k48k, Sciences Po.
  7. Plamen Nemov, 2015. "Regional Reallocation and Housing Markets in a Model of Frictional Migration," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 863-880, October.
  8. Bulent Guler, 2013. "Dual Income Couples and Interstate Migration," 2013 Meeting Papers 898, Society for Economic Dynamics.

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