Market thickness and the impact of unemployment on housing market outcomes
Pengfei Wang and
Journal of Monetary Economics, 2018, vol. 98, issue C, 27-49
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:98:y:2018:i:c:p:27-49
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