August 16th, 2011
Econintersect: A Chicago Fed study claims there is little evidence that home ownership is effecting labor mobility. The study concludes:
We find that state-to-state migration rates among homeowners fell roughly in line with those of renters during the latest recession and early recovery period and roughly in line with previous recessions. Moreover, there is little evidence that migration varied based on the magnitude of a state’s recent house price decline or the employment status of the household head. Given our findings and the significant amount of other current evidence, we conclude that there is little empirical evidence that house lock has been an important driver of the recent high unemployment rate.
The study had two caveats.
With the current data, we are restricted to using state as the definition of a local labor market. But in large states, there may be many separate local labor markets. Preliminary evidence from the SIPP suggests that homeowner in-state migration fell during 2009 and early 2010, while renter in-state migration fell less. If homeowner in-state moves within a local labor market were not completed, the decisions to stay put would have little bearing on geographic mismatch and the unemployment rate. However, if homeowner in-state moves between distant labor markets (e.g., San Francisco and San Diego in California) were not completed, the decisions to stay put might suggest some role for house lock after all.
Another issue is that while we do not see a lot of evidence of geographic mismatch driven by house lock in the data through mid-2010, the unemployment rate was still around 9.5% that summer. Once the demand for labor picks up, it may very well be that concerns about geographic (as well as sectoral or skills) mismatch will come to the fore.
Source: Chicago Fed