Homeownership and labor market outcomes: disentangling externality and composition effects

Propriété immobilière et marché du travail: distinguer effets de composition et d’externalité

Charles-Marie Chevalier and Raphaël Lardeux
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Charles-Marie Chevalier: INSEE - Institut national de la statistique et des études économiques (INSEE), CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Raphaël Lardeux: INSEE - Institut national de la statistique et des études économiques (INSEE), CRED - Centre de Recherche en Economie et Droit - UP2 - Université Panthéon-Assas

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Abstract: While homeownership and unemployment rates are positively related (Oswald, 1996), owners generally have better labor market outcomes. This paper addresses this paradox, disentangling a composition effect and a negative externality. On the one hand, if owners are less likely to be unemployed than renters, a higher homeownership rate should mechanically translate into a lower unemployment rate through a composition effect. On the other hand, extended homeownership may generate a negative externality in the form of frictions impeding matching on the labor market. We carry out estimations at the individual and aggregate levels, using the French Census on a large time span (1968-2011) and interpret the results within a job matching model featuring a composition effect and a negative externality. In the French case, the latter outweighs the former and the homeownership rate is positively correlated with the unemployment rate. Finally, a 10 points rise in the local homeownership rate would be associated to frictions increasing unemployment by around 1 point.

Keywords: homeownership; local labor market; externality; composition effect; propriété immobilière; marché du travail local; externalité; effet de composition (search for similar items in EconPapers)
Date: 2017-11
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05413181v1
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