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30 Jul 2007

The Impact of Housing Market Institutions on Labour Mobility

A European Cross-Country Comparison

Thomas de Graaff / Michiel Van Leuvensteijn

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European Network of Economic Policy Research Institutes (ENEPRI) Working Paper No. 54 / 40 pages

This paper examines the effects of housing market institutions on labour mobility. The authors construct durations for individuals leaving their current job for a different job, becoming unemployed or leaving the labour market, from a sample of households from 14 European countries in 1994-2001. This data are then merged with country-specific housing market institutions, such as transaction taxes, and language and religion diversity. Similar to previous studies, estimated hazards indicate that home-ownership reduces job-to-job mobility as well as the probability to become unemployed or economically inactive on an individual level. However, a comparison between countries reveals that countries with high levels of home-ownership rates also have high levels of unemployment. Therefore, this paper is able to reconcile the seemingly contrasting empirical results from both the macroeconomic and the microeconomic level.