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Author: Quella, Núria
Resulting in 2 citations.
1. Rendon, Silvio Roberto
Quella, Núria
Behind the Great Recession: Job Search and Housing Decisions
IZA Discussion Paper No. 7773 , Institute for the Study of Labor (IZA), December 2013
Cohort(s): NLSY79
Publisher: Institute for the Study of Labor (IZA)
Keyword(s): Credit/Credit Constraint; Home Ownership; Housing/Housing Characteristics/Types; Job Search; Unemployment Rate

Permission to reprint the abstract has not been received from the publisher.

In this paper we analyze a mechanism that is particularly relevant to the workings of the Great Recession: we explain how easier home financing and higher homeownership rates increase unemployment rates. To this purpose we build a model of job search with liquid wealth accumulation and consumption of housing that can be rented, bought on credit, or sold. In our model, more relaxed house credit conditions increase workers' reservation wages, making them more selective in their job search. More selective job searches deteriorate employment transitions: job finding and job-to-job transitions rates decline while job loss rates increase, causing the overall unemployment rate to rise.We estimate this model structurally using NLSY data from 1978 until 2005. We find that more relaxed housing lending conditions, particularly lower downpayment requirements, increase unemployment rates by 6 percent points. We also find that declining labor demand decreases homeownership rates by 14 percent points.
Bibliography Citation
Rendon, Silvio Roberto and Núria Quella. "Behind the Great Recession: Job Search and Housing Decisions." IZA Discussion Paper No. 7773 , Institute for the Study of Labor (IZA), December 2013.
2. Rendon, Silvio Roberto
Quella, Núria
Interactions between Job Search and Housing Decisions: A Structural Estimation
Working Paper No. 15-27, Federal Reserve Bank of Philadelphia, July 2015
Cohort(s): NLSY79
Publisher: Federal Reserve Bank of Philadelphia
Keyword(s): Credit/Credit Constraint; Home Ownership; Housing/Housing Characteristics/Types; Job Search; Unemployment Rate

Permission to reprint the abstract has not been received from the publisher.

In this paper, we investigate to what extent shocks in housing and financial markets account for wage and employment variations in a frictional labor market. To explain these interactions, we use a model of job search with accumulation of wealth as liquid funds and residential real estate, in which house prices are randomly persistent. First, we show that reservation wages and unemployment are increasing in total wealth. And, second, we show that reservation wages and unemployment are also responsive to the composition of wealth. Specifically, when house prices are expected to rise, holding a larger share of wealth as residential real estate tends to increase reservation wages, which deteriorates employment transitions and increases unemployment. We estimate our model structurally using National Longitudinal Survey of Youth data from 1978 to 2005, and we find that more relaxed house Financing conditions, in particular lower down payment requirements, decrease employment rates by 5 percentage points in the short run and by 2 percentage points in the long run. We also find that worse labor market conditions immediately increase homeownership rates by up to 5 percent points, whereas in the long run homeownership decreases by 8 percentage points.
Bibliography Citation
Rendon, Silvio Roberto and Núria Quella. "Interactions between Job Search and Housing Decisions: A Structural Estimation." Working Paper No. 15-27, Federal Reserve Bank of Philadelphia, July 2015.