Does Home Ownership Impair An Individuals Labor Market...

Does home ownership impair an individual s labor market outcome? Some early works suggest that home owners change their locations of residence less often than renters and, thus, home owners are immobile and less flexible. Nickell (1997) found that countries in which citizens are not shackled by the chain of permanent residence (flexible mobility) have relatively high employment rates. This point is also illustrated by Hughes and McCormick (1987), who examined links between housing policies, job mobility and unemployment in the UK. They found that UK housing policies, which seek to reduce spatial mobility, caused an inflexible, inefficient labor outcome in the UK Despite few previous studies on the relationship between home ownership and†¦show more content†¦had the highest unemployment rate in the industrial world, as well as a relatively high home ownership rate. Oswald observed that since 1950s, unemployment rates have risen the fastest in the nations that experienced a relatively high growth in home ownership rate. Also, he found a strong positive correlation between the growth of home ownership and unemployment across the states of the U.S. between 1970 and 1990. He concluded that a higher rate of owner-occupation might therefore be an important factor contributing to higher unemployment rates, a factor which had previously been omitted in empirical studies of unemployment. Oswald s explanation to his observation was that home ownership causes labor immobility, triggering the labor market inefficiency. Selling a home and moving is expensive. Higher moving costs associated with home owners therefore make them less mobile than ren ters. Given this limitation of spatial or labor immobility, an unemployed home owner struggles to find an occupation for which he is ideally suited. This may produce labor inefficiency in the labor market. Although many of macro evidence support Oswald s arugument, Oswald generally drew more opposition than support for his ideas, when scholars used microeconomic data to reject the negative effect of home ownership on employment rate. Flatau et al (2003), Coulson and Fisher (2003, 2007),