The Effect of Homeownership on Geographic Mobility and Labor Market Outcomes
September 10, 2011
This paper examines the effect of homeownership on mobility and labor income and provides new evidence that owning a home makes workers less likely to move in response to labor market shocks. To identify this effect, I develop and estimate a structural dynamic model of housing choices, migration decisions and labor market outcomes. I find that owning a home has a large negative effect on the probability of moving in response to a labor market shock and a small negative effect on labor income. Owners suffering from a decrease in home equity are 40 percent less mobile. I conduct two policy experiments. The first shows that the home mortgage deduction has a positive effect on homeownership, affects mobility and creates an incentive to buy larger houses. Second, I find that if the down payment requirement for buying a home is eliminated, homeownership exhibits a large increase, while the mobility and labor income of households experiencing negative labor market shocks decrease.
Number of Pages in PDF File: 54
Keywords: Homeownership, Mobility, Labor Markets, Structural Model
JEL Classification: J00, J61, R23, R21, H31
Date posted: December 18, 2010 ; Last revised: September 27, 2011