Homeownership, Mobility, and Unemployment: Evidence from Housing Privatization
Abstract: Homeownership is believed to cause higher unemployment. This is because homeowners face higher mobility costs -- limiting their job search to local labor markets. Empirical tests of this prediction have yielded mixed results so far. However, since homeownership in these studies is not randomly assigned, their interpretation is unclear. This paper documents that privatization of public dwellings in Central and Eastern Europe resulted in a quasi-experimental assignment of homeownership to individual households. This facilitates a new test of the effects of homeownership on mobility and unemployment. Using a 2010 micro data on privatizers and renters, we find only weak evidence that homeowners are less willing to move and no evidence of higher unemployment risks relative to renters.