Working paper

Does high home-ownership impair the labor market?

27 May 2013

Abstract: The authors explore the hypothesis that high home-ownership damages the labor market. The results are relevant to, and may be worrying for, a range of policymakers and researchers. The authors find that rises in the home-ownership rate in a US state are a precursor to eventual sharp rises in unemployment in that state. The elasticity exceeds unity: A doubling of the rate of home-ownership in a US state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanism might explain this? The authors show that rises in home-ownership lead to three problems: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. The argument is not that owners themselves are disproportionately unemployed. Evidence suggests, instead, that the housing market can produce negative 'externalities' upon the labor market. The time lags are long. That gradualness may explain why these important patterns are so little-known.

Authors: David G. Blanchflower, Dartmouth College - Department of Economics, National Bureau of Economic Research (NBER), Institute for the Study of Labor (IZA), Peter G. Peterson Institute for International Economics Andrew J. Oswald, University of Warwick - Department of Economics, Institute for the Study of Labor (IZA)

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