Homeownership and labor market outcomes: disentangling externality and composition effects
Ch.-M. Chevalier and
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Ch.-M. Chevalier: Insee, Crest
R. Lardeux: Insee, Cred Université Paris 2
Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques
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 (search for similar items in EconPapers)
JEL-codes: J21 J31 J64 R21 (search for similar items in EconPapers)
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