House Prices, Wealth Effects and Labor Supply

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Date Published 2013
Primary Author Richard Disney
Other Authors John Gathergood
Theme Housing and Wealth Creation


We examine the impact of housing wealth on labour supply using exogenous local variations in house prices and household panel data for Britain. Our analysis controls for variations in local labour demand and income expectations which might co-determine house prices and labour supply. We find significant effects of house price variations on labour supply, consistent with leisure being a normal good. Labour supply is particularly sensitive to house prices among the young and older men. Our findings imply that housing wealth losses may have contributed to the unexpectedly high rates of labour market activity in Britain during the Great Recession.

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