The local employment effect of house prices: Evidence from U.S. States

N Kishor, Hardik A. Marfatia, Gooan Nam and Majid Haghani Rizi

Journal of Housing Economics, 2022, vol. 55, issue C

Abstract: We examine the local demand channel hypothesis of the housing market that predicts a larger response of employment in the non-tradable sector to house price shocks than employment in the tradable sector using state-level monthly data from 1990:M1-2019:M12. Our results from a panel VAR model and out-of-sample forecasting analysis confirm a larger response of non-tradable employment to house price changes. In addition, we also find that unlike short-lived responses to shocks to income and building permits, house price shocks have a very persistent effect on employment. Our findings suggest that states with inelastic housing supply and more volatile house prices tend to have a bigger improvement in forecasting performance for non-tradable employment than for tradable employment.

Keywords: Housing Prices; Panel VAR Models; Regional Forecasting; Tradable and Non-Tradable Employment (search for similar items in EconPapers)
JEL-codes: C53 E24 R10 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:55:y:2022:i:c:s1051137721000607

DOI: 10.1016/j.jhe.2021.101805

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