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Market thickness and the impact of unemployment on housing market outcomes

Li Gan (), Pengfei Wang () and Qinghua Zhang

Journal of Monetary Economics, 2018, vol. 98, issue C, 27-49

Abstract: A search-and-matching model is developed to study how unemployment influences the housing market in the presence of the thick-market effect. A structural estimation of the model is conducted based on Texas city-level data that covers three years—1990, 2000 and 2010. Simulations help clarify how much the thick-market effect amplifies the impact of unemployment. A three-percentage-point increase in the unemployment rate lowers the price by 10.74% and reduces the transaction volume by 5.49%. Incorporating a feedback mechanism from housing prices to unemployment strengthens the amplification magnitude of the thick-market effect.

Keywords: Housing markets; Unemployment; Thick-market effect; Search-and-matching (search for similar items in EconPapers)
JEL-codes: E R (search for similar items in EconPapers)
Date: 2018
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Working Paper: Market Thickness and the Impact of Unemployment on Housing Market Outcomes (2013) Downloads
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DOI: 10.1016/j.jmoneco.2018.04.007

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