House Prices, Geographical Mobility, and Unemployment

Research output: Working paperResearch

  • Marcus Mølbak Ingholt
Geographical mobility correlates positively with house prices and negatively with unemployment over the U.S. business cycle. I present a DSGE model in which declining house prices and tight credit conditions impede the mobility of indebted workers. This reduces the workers’ cross-area competition for jobs, causing wages and unemployment to rise. A Bayesian estimation shows that this channel more than quadruples the response of unemployment to adverse housing market shocks. The estimation also shows that adverse housing market shocks caused the decline in mobility during the Great Recession. Absent this decline, the unemployment rate would have been 0.5 p.p. lower.
Original languageEnglish
Number of pages32
Publication statusPublished - 2017
SeriesUniversity of Copenhagen. Institute of Economics. Discussion Papers (Online)
Number17-06
ISSN1601-2461

ID: 178283102