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Geographic reallocation and unemployment during the Great Recession: The role of the housing bust

Fatih Karahan () and Serena Rhee

Journal of Economic Dynamics and Control, 2019, vol. 100, issue C, 47-69

Abstract: We provide a spatial general equilibrium model of migration and job searching to study the role the housing bust played in mobility rates and labor market outcomes. We estimate the parameters governing the migration decisions of households using data on state-level migration and labor market patterns from 1991 to 2007 and use the estimated model to characterize the effects of the housing market collapse on labor market outcomes. Our analysis suggests that the housing bust is responsible for 12% of the increase in unemployment as it reduces workers’ reallocation and forces more homeowners to look for jobs in areas with lower job-finding rates.

Keywords: Geographic reallocation; Housing bust; Migration; Unemployment (search for similar items in EconPapers)
JEL-codes: J61 J64 R12 R23 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Geographical reallocation and unemployment during the Great Recession: the role of the housing bust (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:100:y:2019:i:c:p:47-69

DOI: 10.1016/j.jedc.2018.12.007

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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