Does Housing Make I.T. Boom? The Collateral Channel, Information Technology, and Skilled Labor

35 Pages Posted: 6 Sep 2017

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Pei-Yu Chen

Arizona State University (ASU) - Department of Information Systems

Bin Gu

Arizona State University (ASU) - Department of Information Systems

Date Written: August 28, 2017

Abstract

Is housing price growth causally linked with information technology (IT) investment among firms? Using establishment data between 1996-2007, we find that a percentage point rise in the growth rate of zipcode-level housing prices is associated with a 0.03-0.08% increase in information technology. Our results are robust to exploiting historical housing price shocks between 1980-1990, which generate housing market momentum between 1996-2007. We show that one major mechanism behind the housing-IT elasticity is the attraction of high skilled workers. We reconcile the internet productivity puzzle — that the adoption of advanced internet is associated with employment growth only in high-wage areas — by showing that the collateral channel is not present in these areas. Even in the presence of housing price growth, firms do not invest in IT when they do not have access to high skilled workers.

Keywords: Housing prices, information technology, collateral channel, skill bias

JEL Classification: D22, L86, R31

Suggested Citation

Makridis, Christos and Chen, Pei-Yu and Gu, Bin, Does Housing Make I.T. Boom? The Collateral Channel, Information Technology, and Skilled Labor (August 28, 2017). Available at SSRN: https://ssrn.com/abstract=3030441 or http://dx.doi.org/10.2139/ssrn.3030441

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Pei-Yu Chen

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

Bin Gu

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

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