A Link Between Housing Markets and Labor Markets: Time to Move and Aggregate Unemployment

A model is developed that allows for interaction between the labor market and the housing market. A job location has an associated commuting time that may affect the job acceptance decision. Obstacles to mobility, such as regulations in the housing market will affect the reservation strategy of workers. Thus, aggregate unemployment will depend, at least partly, on the functioning of the housing market. Data from the U.S. and E.U. reveals that individuals in the U.S. are about three times more likely to experience a change in residence within a given year. At the same time, unemployment in the E.U. is roughly twice that in the U.S. This paper seeks to understand, both qualitatively and quantitatively, how housing market frictions might affect the functioning of the labor market