Home Ownership As a Labor Market Friction

Abstract

This paper estimates the effect of home ownership on individuals' unemployment. Because of higher moving costs, home owners will be less willing than renters to re- locate for work and could therefore face longer unemployment spells. Estimation is complicated by the endogeneity of ownership, as owners will have different abilities, preferences and job prospects than renters. I instrument for home ownership using a preference shifter from the worker's childhood environment. The results indicate that home ownership is a significant hindrance to mobility, and homeowners suffer longer unemployment spells and more frequent job loss because of it.

Keywords: home ownership, unemployment, job search, mobility

JEL Classification: J6, R2, R3, D1