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The Effect of Homeownership on Geographic Mobility and Labor Market Outcomes

Listed author(s):
  • Hernan Winkler

    (UCLA)

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, January.
  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.
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  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.
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  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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