Homeownership and Labour-Market Behaviour: Interpreting the Evidence

Abstract

IntroductionAlthough owner-occupied housing is generally regarded as the preferred tenure type by policy makersöwho stimulate it through mortgage interest deductibility, tax exemption of capital gains, and other measures öthere have also been more critical voices. Among economists, the most prominent of these is probably Oswald (1996;1999). His thesis states that there is a causal relationship between dwelling tenure choice and high unemployment. He finds that a 10% increase in the rate of homeownership is associated with 2% more unemployment. If this indeed signals a causal effect, then the increase in homeownership in many European countries in the second half of the 20th century would be an important reason behind the increase in structural unemployment. Oswald suggested that there are a number of reasonsöone of them being the higher transaction costs associated with moving house öwhy exit rates from unemployment should be expected to be much lower among owner-occupiers than among tenants, or at least of tenants in the private (unregulated) part of the housing market.Although homeownership increases with income, and workers with high incomes have in general more human capital and a lower risk of becoming unemployed, the possibility remains that the probability of finding a new job after becoming unemployed is substantially lower for homeowners than for tenants. Indeed, the hypothesis that the higher costs of moving for homeowners hamper residential mobility for job reasons seems a priori quite plausible, and the negative effect on unemployment appears to be a natural consequence. Oswald's thesis therefore directed attention towards a potentially important and until then neglected effect of an increase in homeownership.It is therefore no surprise that Oswald's (1996Oswald's ( , 1997 papers quickly triggered additional research: for instance, Pehkonen (1997) and Partridge and Rickman (1997).In their contribution to the Handbook of Labour Economics, Nickell and Layard (1999) considered the correlation between unemployment and the share of homeownership for OECD countries (see also Nickell, 1997;. In their regression analyses, while controlling for other variables, they find a significant coefficient for the share of

Making Sense of Housing Disparities Research: A Review of Health and Economic Inequities

“…The human capital resources that are often used as predictors of housing ownership and value include occupational attainment and employment stability (Rouwendal & Nijkamp, 2010) and education (Beverly & Sherraden, 1997;Oliver & Shapiro, 1995).…”

Homeownership, Unemployment and Commuting Distances

“…The analysis just presented implies that if DARA holds, workers with high housing cost have a higher exit rate from unemployment than otherwise comparable workers with lower housing cost. This analysis extends that in Rouwendal and Nijkamp (2010) who consider a model with variable search intensity but no variation in offered wage rates and assume that the utility function is quadratic. Moreover, it provides a theoretical underpinning of the results reported by Flatau et al (2003) for Australia.…”

“…This prediction is an important contribution of the present paper and will be tested in the empirical analysis below. An important implication is that Oswald's thesis will hold unless the homeowners are so highly leveraged that their out-of-pocket housing costs exceed those of renters (as is found in the Netherlands by Rouwendal and Nijkamp, 2010).…”

“…The higher overall exit rate of homeowners can only be explained by extending the model in such a way that homeowners differ from renters in other ways than just by the cost of residential mobility. Put differently: the relationship between homeownership and unemployment appears to be more complicated than is suggested by the model used by, for instance Munch et al (2006) An alternative possibility to reconcile the theory with the empirical facts was suggested by Rouwendal and Nijkamp (2010) who developed a model in which search intensity depends on the value of income-net-of-housing-cost, the latter being fixed in the short run.…”

Spatial Commuting Patterns of German Regional Labour Markets: A Sustainability Perspective

“…For example, in a model of joint decisions concerning where to live and work and how to travel to the workplace, Li et al (2010) find that transportation improvements which decrease commuting time will not only increase commuting trips but also affect residential location (making people more likely to accept a greater distance from their workplace) (see also Rouwendal and Nijkamp 2010). Clearly, current spatial dynamics stimulate various mobility processes that are characterized by a wide array of externalities.…”