Does Promoting Homeownership Always Damage Labour Market Performances?

CRREP working paper serie 2018-12

26 Pages Posted: 16 Jul 2018

See all articles by Julie Beugnot

Julie Beugnot

Université Laval

Olivier Charlot

Université de Franche-Comté

Guy Lacroix

Université Laval - Département d'Économique; IZA Institute of Labor Economics

Date Written: July 01, 2018

Abstract

In this paper we analyse the link between homeownership and various aggregate and individual labour market outcomes. Our aim is to investigate the likely consequences of public policies that promote homeownership. To this end, we develop a circular firm-worker matching model with Nash-bargained wage setting and free market entry. Homeowners are assumed to be less mobile than tenants and to bear higher mobility costs. Our numerical exercises show that tenants usually have lower unemployment rates and lower wage rates than homeowners. Importantly, workersʼ performances do not necessarily improve following an increase in the proportion of homeowners. The latter crucially depends on the relative utility enjoyed by homeowners and tenants when unemployed. In the aggregate, nevertheless, we find that the unemployment rate generally increases following an increase in the proportion of homeowners. Yet, the link between the two can be reversed if the homeownersʼ utility is lower than that of tenants when unemployed. Our model thus identifies a number of conditions under which Oswaldʼs conjecture is likely to hold or not. Thus, our results do not necessarily support the view that policies fostering homeownership are adequate public policies given their potentially negative effect on the labour market.

Keywords: Stochastic job matching, Homeownership, Unemployment, Mobility

JEL Classification: H31, J61, J64, R23

Suggested Citation

Beugnot, Julie and Charlot, Olivier and Lacroix, Guy, Does Promoting Homeownership Always Damage Labour Market Performances? (July 01, 2018). CRREP working paper serie 2018-12. Available at SSRN: https://ssrn.com/abstract=3214659 or http://dx.doi.org/10.2139/ssrn.3214659

Julie Beugnot (Contact Author)

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Olivier Charlot

Université de Franche-Comté ( email )

1 rue Claude Goudimel
25030 Besancon cedex, DOUBS 25000
France

Guy Lacroix

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-2024 (Phone)
418-656-7798 (Fax)

IZA Institute of Labor Economics

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

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