Housing Liquidity, Mobility, and the Labour Market

Allen Head () and Huw Lloyd-Ellis ()

No 1197, Working Papers from Queen's University, Department of Economics

Abstract: The relationships among geographical mobility, unemployment and the value of owner-occupied housing are studied in an economy with heterogeneous locations and search frictions in the markets for both labour and houses. Differences in labour market conditions between cities affect the speed with which houses may be sold--that is, the liquidity of housing. At the same time housing market conditions affect employment decisions and thus the allocation of labour across cities. In equilibrium, unemployment rates for home-owners are higher than for otherwise identical renters. Unemployment and home-ownership rates are, however, negatively correlated across cities. In a parameterized example we find that, although renters are much more mobile than owners, the impact of home-ownership on aggregate unemployment is quantitatively small.

Keywords: liquidity; mobility; home-ownership; unemployment (search for similar items in EconPapers)
JEL-codes: J61 J64 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-geo, nep-lab, nep-mig and nep-ure
Date: 2008-12
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:1197

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