Housing, mobility and unemployment

The paper elucidates the relationship between housing tenure, regional mobility and unemployment. It develops a model that can explain the paradoxical empirical regularity that higher owner occupation rates are associated with higher levels of unemployment although homeowners tend to be unemployed less often. The choice of housing tenure affects moving costs and thereby regional mobility and unemployment. In addition, moving costs reduce on-the-job search effort and search effectiveness. The paper analyzes the impact of symmetric and asymmetric shocks on regional mobility and unemployment and discusses effects of government intervention in the housing market.