Adjustment in Local Labour and Housing Markets

48 Pages Posted: 27 Aug 2007  

Arthur Grimes

Motu Economic and Public Policy Research Trust

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Melanie Morten

Motu Economic and Public Policy Research Trust

Multiple version iconThere are 2 versions of this paper

Date Written: August 2007

Abstract

This paper analyses local labour and hosuing market adjustment in New Zealand from 1989 to 2006. We use a VAR approach to examine the adjustment of employment, employment rate, participation rate, wages, and house prices in response to employment shocks. Migration is a major adjustment response at both a national and regional level. Nationally, a 1% positive employment shock leads to a long-run level of employment 1.3% higher, with half of the extra jobs filled by migrants. A 1% region-specific employment shock raises the long-run regional share of employment by 0.5 percentage points, due entirely to in-migration. House price responses differ at different spatial scales. Nationally, house prices are very responsive to employment shocks: a 1% employment shock raising long run house prices by 6% , as may be expected with an upward sloping housing supply curve. Paradoxically, this relationship does not hold at the regional level.

Keywords: Regional Labour Market Adjustment, Internal Migration, House Prices, Vector Autoregression

JEL Classification: R23, J61, C33

Suggested Citation

Grimes, Arthur and Maré, David C. and Morten, Melanie, Adjustment in Local Labour and Housing Markets (August 2007). Available at SSRN: https://ssrn.com/abstract=1007148 or http://dx.doi.org/10.2139/ssrn.1007148

Arthur Grimes

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

David C. Maré (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

PO Box 24390
Wellington, 6021
New Zealand
64-4-9394250 (Phone)

HOME PAGE: http://www.motu.org.nz

University of Waikato - Economics

New Zealand

Melanie Morten

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

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