Housing and Unemployment

Tyler Cowen’s Marginal Revolution web site points to Andrew Oswald’s finding that home ownership is the most reasonable explanation for differences in unemployment rates between countries. The scatter graph has a very impressive fit.http://www2.warwick.ac.uk/fac/soc/economics/staff/faculty/oswald/homesnt.pdf

I first saw this phenomenon when we would drive through West Virginia back in the late 50s & early 60s. I was struck by the unemployed coal miners sitting on their porches. Their houses were quite nice, but nobody wanted to buy them because the economy was dead.

Later, my brother moved to Youngstown, Ohio after then steel mills shut down. I remember when he called my bemoaning that a tornado missed his home by only a few hundred yards. At the time, arson was the most important industry in the town.


1 comment so far

  1. Pratik on

    Andrew used to be my tutor at Warwick until last year for my dissertation – in fact, I enjoyed writing the dissertation so much, I regret leaving academia and economics, and finding myself a City job!

    This is a very interesting analysis. A important caveat that he misses out though is (he may well not have missed it out, I’ve just skimmed through the paper) clustering. London offers a cluster of high-paying jobs. As a result, house prices are very high. People wanting to move into London struggle to afford the prices, while those inside (especially young professionals) tend to rent.

    While clustering is very beneficial for those already living in it, because of the ease of finding a rental space, there is possible inertia between London and other regions.

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