TY - UNPB

T1 - House Prices, Geographical Mobility, and Unemployment

AU - Ingholt, Marcus Mølbak

PY - 2017

Y1 - 2017

N2 - Geographical mobility correlates positively with house prices and negatively with unemployment over the U.S. business cycle. I present a DSGE model in which declining house prices and tight credit conditions impede the mobility of indebted workers. This reduces the workers’ cross-area competition for jobs, causing wages and unemployment to rise. A Bayesian estimation shows that this channel more than quadruples the response of unemployment to adverse housing market shocks. The estimation also shows that adverse housing market shocks caused the decline in mobility during the Great Recession. Absent this decline, the unemployment rate would have been 0.5 p.p. lower.

AB - Geographical mobility correlates positively with house prices and negatively with unemployment over the U.S. business cycle. I present a DSGE model in which declining house prices and tight credit conditions impede the mobility of indebted workers. This reduces the workers’ cross-area competition for jobs, causing wages and unemployment to rise. A Bayesian estimation shows that this channel more than quadruples the response of unemployment to adverse housing market shocks. The estimation also shows that adverse housing market shocks caused the decline in mobility during the Great Recession. Absent this decline, the unemployment rate would have been 0.5 p.p. lower.

KW - Faculty of Social Sciences

KW - D58

KW - E24

KW - E32

KW - E44

KW - R21

KW - R23

KW - Refinancing collateral constraint

KW - Geographical mobility

KW - Wage setting

KW - DSGE model

KW - Refinancing collateral constraint

KW - Geographical mobility

KW - Wage setting

KW - DSGE model

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - House Prices, Geographical Mobility, and Unemployment

ER -