House Lock and Structural Unemployment

42 Pages Posted: 17 Nov 2012

See all articles by Robert G. Valletta

Robert G. Valletta

Federal Reserve Bank of San Francisco; IZA Institute of Labor Economics

Abstract

A recent decline in geographic mobility in the United States may have been caused in part by falling house prices, through the "lock in" effects of financial constraints faced by households whose housing debt exceeds the market value of their home. I analyze the relationship between such "house lock" and the elevated levels and persistence of unemployment during the recent recession and its aftermath, using data that covers the period through the end of 2011. Because house lock will extend job search in the local labor market for homeowners whose home value has declined, I focus on differences in unemployment duration between homeowners and renters across geographic areas differentiated by the severity of the decline in home prices. The empirical analyses rely on microdata from the monthly Current Population Survey (CPS) files and an econometric method that enables the estimation of individual and aggregate covariate effects on completed unemployment durations in "synthetic cohort" (pseudo-panel) data. The estimates indicate the absence of a meaningful house lock effect on unemployment duration.

Keywords: unemployment, house prices, mobility

JEL Classification: J6, R31

Suggested Citation

Valletta, Robert G., House Lock and Structural Unemployment. IZA Discussion Paper No. 7002. Available at SSRN: https://ssrn.com/abstract=2177200

Robert G. Valletta (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3345 (Phone)
415-977-4084 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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