Transcript Housing tenure and labour supply

Neujobs Validation Event
9-11 April 2014
Institute for Study of Labor, Bonn
Workpackage 14.3
Housing tenure and labour supply
Kees Dol (TU Delft)
Nick Horsewood (University of Birmingham)
a) Home Ownership, Mobility and Unemployment: A
re-evaluation of the Oswald thesis
The ‘Oswald hypothesis’ proposed that the housing market
was ‘at the heart of the European unemployment problem’
and was accompanied by strong claims that ‘We can put
Europe back to work . . . by reducing home ownership’
(Oswald, 1999, p. 1).
Transaction costs for property purchases, 2009
Higher transaction costs lead to a disincentive to relocate to
areas where jobs are more abundant.
Housing market results in a location mismatch between
vacancies and the unemployed .
Data
Panel framework
16 countries (Austria, Belgium, Denmark, Estonia,
Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain,
Sweden and the United Kingdom)
3 time periods (1998-2002, 2003-2007 and 2008-2011).
Model
Dependent variable:
unemployment, long-term unemployment
Independent variables:
a) Labour market variables
Replacement ratio
Tax wedge
Trade union density
b) Housing market variables
Home ownership
Stock of mortgage market
House price inflation
.
Findings
Traditional labour market variables not key factors to
explain cross-country differences in unemployment or
long-term unemployment.
Housing market variable provides main explanation more complicated than “Oswald hypothesis”
Growth of household indebtedness key variable –
possibly acts as a barrier to move.
Policy implications
Should rise of home ownership be encouraged?
If so, implications for rigidity of labour market when
faced by a demand shock.
Restrictions on mortgage lending?
b) The Housing Market and Business Starts
About a third of respondents in a Eurostat 2012 survey
stated that lack of collateral or a guarantee was the main
reason for a banking loan refusal
Collateral is one major route to overcome credit restrictions
set by formal financial institutions,
Home ownership = collateral
Factors influencing new business formation.
1. Market opportunities
2. Regulatory framework
3. R & D expenditure and new technology
4. Entrepreneurial capabilities and culture
5. Access to finance
Data
Panel framework
Countries:
Austria, Belgium, Czech Republic, Estonia, Finland, France,
Germany, Hungary, Ireland, Italy, Luxembourg, the
Netherlands, Poland, Portugal, Slovenia, Slovakia, Sweden,
the UK
Time period: 2004 to 2009
Model
Dependent variable:
New firms (% GDP)
New firms (% total firms)
Explanatory variables:
Housing market (M)
Wealth (Ph, Pe)
Business opportunities (U, GDP)
Government sector (G/Y)
Findings
Traditional factors:
Business opportunities
Housing market:
High returns discourage new business.
High levels of mortgage indebtedness encourage new
business formation.
Policy implications
Encouraging home ownership?
•Increases house prices
•Encouraging speculation in the housing market.
•Divert funds away from industry
Reduce incentives to expand mortgage lending
c) Home ownership and the retirement decision
Does which home ownership affects the timing of
retirement?
Focus on the decision to withdraw from active participation
in the labour market, early or late.
Home ownership and early retirement:
• Outright ownership enable households to live rent free
• Unexpected capital gains enables households to withdraw
from labour market
- moving down market
- reverse mortgage
Factors affecting timing of retirement
• Personal factors
• Family-related factors
• Work and organisation-related factors
• Socio-economic factors
Data
i) Micro data
EU SILC
ii) Macro data
21 countries:
Austria, Belgium, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Poland, Spain,
Slovenia, Slovak Republic, Sweden and the UK
Time period: 1993 to 2011 (5-year averages)
Findings
Timing of retirement determined by
• Public-sector pensions
• Economic opportunities
• Personal circumstances
• Housing market factors
- Outright home ownership of a facilitates giving up a
wage income and thus early retirement
Policy implications
If you want to encourage households to work longer
• Encourage household indebtedness
• Encourage renting
Bigger picture
•Housing market has big implications for labour market
activity
•Scenarios
•Data issues