Housing Tenure, Geographical Mobility and the Labour Market: the Role of the Employment Exit Rate

This paper studies the effect of home-owners' migration costs on unemployment in an economy where workers move both for work- and non-work-related reasons. To this end, a search model with heterogeneous locations is developed and calibrated to the US economy. Both the employment and unemployment exit rates are endogenous. Migration costs imply that home-owners quit their jobs less often than renters and find jobs at a higher rate. Consistent with the empirical evidence, the model predicts that home-owners have a lower unemployment rate than renters.Financial support from the Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco (IT869-13) and the Ministerio de Ciencia e Innovación (BES-2008-004549) are gratefully acknowledged