Homeownership, Mobility, and Unemployment: Evidence from Housing Privatization

Abstract

Homeownership is believed to cause higher unemployment. This is because homeowners face higher mobility costs that limit their job search to local labor markets. Empirical tests of this prediction have yielded mixed results so far, possibly due to the endogeneity of homeownership. This paper documents that the privatization of public housing in Central and Eastern Europe after the fall of the Iron Curtain resulted in a quasi-experimental assignment of homeownership to individual households. This facilitates a new test of the effects of homeownership on mobility and unemployment. We find only weak evidence that homeowners are less willing to move and no evidence of higher unemployment risks relative to renters.

Keywords: Homeownership, housing privatization, mobility, unemployment

JEL Classification: J61, J64, P14, P26