Homeownership, Unemployment and Commuting Distances

Tinbergen Institute Discussion Paper 13-144/VIII

27 Pages Posted: 21 Sep 2013

See all articles by Yuval Kantor

Yuval Kantor

Vrije Universiteit Amsterdam, School of Business and Economics

Peter Nijkamp

Vrije Universiteit Amsterdam, School of Business and Economics

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Date Written: February 9, 2012

Abstract

More than a decade ago Oswald has formulated the thesis that homeownership increases unemployment. Empirical research on micro data has confirmed that unemployed homeowners are less inclined to move house in combination with accepting a new job elsewhere. However, in general for European countries, residential mobility associated with unemployment spells appears to be too small to be able to have a substantial impact on labour market outcomes. The present paper aims to make a new contribution to the scientific debate on Oswald’s thesis by addressing two complementary issues: risk attitudes of job seekers and commuting costs. We show that decreasing absolute risk aversion implies that the exit rate from unemployment is increasing in housing cost in the context of a standard job search model. In a spatial setting this is shown to imply that higher housing costs increase average commuting distances as well. We test these predictions on Dutch register data. Our empirical results show that outright homeowners have lower exit rates from unemployment than renters and are more reluctant to accept long commutes, which confirms Oswald’s thesis. However, highly leveraged homeowners have higher exit rates than renters and are more inclined to accept longer commutes, which confirms earlier findings in the literature.

Keywords: homeownership, unemployment duration, spatial labour markets

JEL Classification: J6, R2

Suggested Citation

Kantor, Yuval and Nijkamp, Peter and Rouwendal, Jan, Homeownership, Unemployment and Commuting Distances (February 9, 2012). Tinbergen Institute Discussion Paper 13-144/VIII, Available at SSRN: https://ssrn.com/abstract=2327010 or http://dx.doi.org/10.2139/ssrn.2327010

Yuval Kantor (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Peter Nijkamp

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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