The Effect of Homeownership on Geographic Mobility and Labor Market Outcomes
54 Pages Posted: 18 Dec 2010 Last revised: 27 Sep 2011
Date Written: 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.
Keywords: Homeownership, Mobility, Labor Markets, Structural Model
JEL Classification: J00, J61, R23, R21, H31
Suggested Citation: Suggested Citation