Labor Market Institutions and Homeownership

Abstract

To what extent labor market institutions can explain homeownership rate differences over time and across countries? Using data from 19 countries over fifty years, I find a positive correlation between employment rigidities and homeownership, and a negative correlation with wage. I rationalize these findings through a DSGE model where heterogeneous households face a housing tenure decision in the presence of labor frictions. Labor rigidities affect housing tenure choice through their impact on employment and wage volatility. Labor institutions explain a relevant share of homeownership heterogeneity between countries and over time and labor reforms can interfere with policies targeted to increase homeownership.

Keywords: Housing markets; Labor market institutions; DSGE; Labor reforms

JEL Classification: J08; J30; J50; R20; R21