High Home Ownership as a Driver of High Unemployment
20th June 2013
A doubling of home ownership is associated with more than a doubling of the long-run unemployment rate.
We are not sure what explains our correlation. But we show, using various micro data sets, that higher home ownership leads to lower labour mobility, greater commute-to-work times, and a lower rate of business formation. Our hunch, on which further work will be needed, is that the housing market exerts powerful externalities upon the labour market. This would not have surprised Milton Friedman, who, in his writings on the natural rate of unemployment, emphasised the need for labour mobility in an efficient economy.