Housing and the Labor Market: Time to Move and Aggregate Unemployment

Peter Rupert () and Etienne Wasmer

No 4172, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The Mortensen-Pissarides model with unemployment benefits and taxes has been able to account for the variation in unemployment rates across countries but does not explain why geographical mobility is very low in some countries (on average, three times lower in Europe than in the U.S.). We build a model in which both unemployment and mobility rates are endogenous. Our findings indicate that an increase in unemployment benefits and in taxes does not generate a strong decline in mobility and accounts for only half to two-thirds of the difference in unemployment from the US to Europe. We find that with higher commuting costs the effect of housing frictions plays a large role and can generate a substantial decline in mobility. We show that such frictions can account for the differences in unemployment and mobility between the US and Europe.

Keywords: labor search frictions; unemployment; housing market imperfections; commuting costs (search for similar items in EconPapers)
JEL-codes: J30 J60 R20 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-05
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - published in: Journal of Monetary Economics, Carnegie-NYU-Rochester Conference Issue, 2012, 59 (1), 24-36

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Related works:
Journal Article: Housing and the labor market: Time to move and aggregate unemployment (2012)
Working Paper: Housing and the Labor Market: Time to Move and Aggregate Unemployment (2009)
Working Paper: Housing and the Labor Market: Time to Move and Aggregate Unemployment (2009)
Working Paper: Housing and the Labor Market: Time to Move and Aggregate Unemployment (2009)
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