Université de Lausanne

Ecole des HEC
Département d'économétrie et d'économie politique

Thursday October 16, 2008, 13:00
Extranef, Dorigny, room 126

Huw LLOYD-ELLIS
(Queen's University, Kingston, Canada)

Housing Liquidity, Home Ownership and Unemployment

Abstract
The relationship between unemployment and the value of owner-occupied housing is studied in an economy with heterogeneous locations and search frictions in the markets for both labour and houses. Differences in labour market conditions between cities affect the liquidity of houses (i.e. the speed with which houses may be transferred between households). At the same time housing market conditions affect decisions to accept offers and the allocation of labour across cities. Our theory yields a form of unemployment that results from home-ownership, so that unemployment rates for home-owners are higher than for otherwise identical renters. However, because prices and rental rates are endogenously determined, unemployment is lower, and wages higher, in cities with greater home-ownership. At the aggregate level, home-ownership does have a positive impact on unemployment, but the effect is quantitatively small.

Web site of the seminar (with paper online): http://www.hec.unil.ch/deep/evenements-english/e-sem-all-2008-09.htm