High Home-Ownership Rate Has an Adverse Effect on the Labor Market
| Date Published | 5/23/2013 |
| Author | Marja Hoek-Smit |
| Theme | |
| Country |
A study by David Blanchflower and Andrew Oswald explored the
hypothesis that high home-ownership may impair the vitality of the labor
market. Their findings show that a doubling of the rate of home-ownership in the
US state they study is a precursor to a more than doubling of the unemployment
rate of that state in the long-run, i.e. elasticity exceeds unity. A possible
explanation why such pattern has attracted so little notice and documentation
is long time lags. High levels of home-ownership do not have immediate effects
on the labor market within a year; they tend to do so, based on the study’s
findings, the following year and can take up to five years to become evident.
Blanchflower and Oswald found evidence that the high
home-ownership rate in this US state is associated with:
1.Lower levels of labor mobility; where doubling
of the home-ownership rate is associated with cutting the mobility rate in half.
The results
do not suggest that owners themselves are disproportionately unemployed. They
suggest, instead, that home-ownership can produce negative ‘externalities’ on
employment. Blanchflower and Oswald state: “Our
paper makes a simple statistical contribution and discusses possible
mechanisms” and that the results “seem
relevant to, and should perhaps be seen as worrying for,
a wide range of policy-makers and
researchers.”
2.Greater commuting times; consistent with the
view that the cost of traveling to work is negatively related to the rate of
employment as it raises the opportunity cost of a job.
3.Fewer new firms and establishments; conceivably
due to zoning and NIMBY effects thus a lower degree of tolerance for new
businesses.
Link to paper: http://hofinet.org/documents/doc.aspx?id=1871