The Puzzle of Job Search and Housing Tenure: a Reconciliation of Theory and Empirical Evidence

This paper attempts to reconcile the empirical evidence with the argument in favour of a positive effect of homeownership on exit rates from unemployment, known as \Oswald's thesis". While the theory would suggest that homeowners experience more difficulties than renters to exit unemployment due to lower residential mobility, the empirical literature has typically found lower unemployed duration for homeowners. Taking into account some of the reasons for the falsification of the Oswald's thesis, we provide evidence which supports it. At first, in a theoretical model of endogenous job search we show that homeowners' higher moving costs imply unambiguously lower search and lower job finding rates, even though an opposite effect works for jobs which do not require a move. Then, in the empirical analysis we make use of data drawn from the British Household Panel Survey to compare job search intensity measures by housing tenure. We find that, controlling for housing costs and for different residential statuses, non-employed outright owners have definitely a lower attachment to the labour market than renters, and that this effect is even more evident when we compare them to private renters

Housing Tenure and Individual Labour Market Outcomes. An Empirical Assessment Based on the UK Labour Force Survey

We analyse the impact of the housing tenure on labour market outcomes using individual data from the UK Labour Force Survey. In defining the residential status, we distinguish between outright owners and mortgage-holders, and between social and private renters. We estimate both a binary model for the probability to be unemployed and a hazard model for exits out of unemployment. In both models we test for endogenity of housing tenure. In the binary model, exogeneity is rejected so we perform endogenous multinomial treatment effects estimates. In the hazard model we find no evidence of unobserved heterogeneity thus estimates are performed assuming exogeneity. Results show that mortgagers have the lowest probability to be unemployed and the highest job finding rates, while social renters exhibit the worst performance. Whether private renters perform better than outright owners is a matter of debate: while we have no evidence in favour of this claim, the evidence in favour of the opposite is only modest

A new career in a new town. Job search methods and regional mobility of unemployed workers

Labour mobility is critical for adjusting imbalance between local labour markets. Yet, labour markets appear still very localized. Existing studies on job search report that the choice of search methods influences job outcomes, with social contacts accounting for a substantial fraction of job matches. Whether search methods are conducive to local or national jobs has not been examined yet. This paper establishes a link between job search and regional mobility, investigating the impact of search methods on unemployment exits within and across local labour markets. The effect of search methods is estimated by a Propensity Score Matching approach, using data from the British Household Panel Survey. Results show that only direct approach to employers enhances the job hazard with regional move. Conversely, social contacts and advertisements are found to increase the hazard to local employment, although the effect of social contacts wears off as the unemployment spell prolongs. No impact is found by Employment Agencies on either exit. These findings suggest that the widespread use of social contacts, while enhancing job matches in the local labour market, might contribute to restrict labour mobility. Therefore, they bear support to policies promoting diffusion and efficacy of alternative methods, particularly when the target is long-term unemployment. Results also point out the opportunity of reforms of the job search assistance and placement service offered by Employment Agencies, taking these limitations into account.info:eu-repo/semantics/publishedVersio

Diversity and the technological impact of inventive activity: evidence for EU regions

Diversity has been considered as a prerequisite for turning prevailing technological trajectories into new and unexpected directions. However, little evidence exists on the exact nature of the more direct relationship between diversity and the impact of technologies. One main contribution of this paper is therefore to investigate the relationship between technological diversity and the impact of inventions across EU regions. Using EPO patent data, a set of measures is created considering different notions of diversity and different levels of technological aggregation, as allowed by the hierarchical structure of the International Patent Classification (IPC). The technological impact of inventions is captured by two citation-based indicators measuring an average and a high impact. For both measures we find that diversity is typically detrimental, or at best neutral, for the impact of new technologies, except when a very fine-grained technological detail is taken into account. However, in the latter case, nearly opposite results are found, namely, positive effects from related variety and, particularly for high technological impact, from combination of relatively distant technologies. Therefore, an important contribution of this paper is to show that these effects are very sensitive to the aggregation level used, and hence that policymakers should gain a very detailed understanding about the relations among technologies before implementing either specialization or diversification strategies.JRC.DDG.01-Econometrics and applied statistic

The evolution of networks of innovators within and across borders: Evidence from patent data

Recent studies on the geography of knowledge networks have documented a negative impact of physical distance and institutional borders upon research and development (R&D) collaborations. Though it is widely recognized that geographic constraints and national borders impede the diffusion of knowledge, less attention has been devoted to the temporal evolution of these constraints. In this study we use data on patents filed with the European Patent Office (EPO) for OECD countries to analyze the impact of physical distance and country borders on inter-regional links in four different networks over the period 1988-2009: (1) co-inventorship, (2) patent citations, (3) inventor mobility and (4) the location of R&D laboratories. We find the constraint imposed by country borders and distance decreased until mid-1990s then started to grow, particularly for distance. We further investigate the role of large innovation "hubs" as attractors of new collaboration opportunities and the impact of region size and locality on the evolution of cross-border patenting activities. The intensity of European cross-country inventor collaborations increased at a higher pace than their non-European counterparts until 2004, with no significant relative progress thereafter. Moreover, when analyzing networks of geographical mobility, multinational R&D activities and patent citations we cannot detect any substantial progress in European research integration above and beyond the common global trend

Networks of innovators within and across borders. Evidence from patent data

Recent studies on the geography of knowledge networks have documented a negative impact of physical distance and institutional borders upon research and development (R&D) collaborations. Though it is widely recognized that geographic constraints hamper the diffusion of knowledge, less attention has been devoted to the temporal evolution of these constraints. In this study we use data on patents filed with the European Patent Office (EPO) for 50 countries to analyze the impact of physical distance and country borders on inter-regional links in four different networks over the period 1988-2009: (1) co-inventorship, (2) patent citations, (3) inventor mobility and (4) the location of R&D laboratories. We find the constraint imposed by country borders and distance decreased until mid-1990s then started to grow, particularly for distance. The intensity of European cross-country inventor collaborations increased at a higher pace than their non-European counterparts until 2004, with no significant relative progress afterwards. Moreover, when analyzing networks of geographical mobility, multinational R&D activities and patent citations we do not depict any substantial progress in European research integration aside from the influence of common global trends

Housing Tenure and Labour Market Outcomes. An Investigation of the Oswald's Hypothesis

Housing tenure structures differ considerably across OECD countries. Typically, the share of owner-occupied housing is very high in Southern European countries (Spain, Italy, Greece), while relatively low in Austria, Germany, France, the Netherlands and in some Nordic countries such as Sweden, Finland and Denmark (see Catte et al. [2004]). This share has increased in most OECD countries during last two decades. Italy, Spain, Portugal, the Netherlands and Belgium registered the largest increases from the eighties to the mid of the first decade of the century. In the UK, the homeonwership rate increased steadily up to 2005, then dropped sharply in the last few years. High homeownership rates and their increments have been in part determined by pro-ownership policies implemented throughout most OECD countries. Such policies can take the vest of tax reliefs for mortgage interest payments, exemptions for capital gains taxation applied to residential property, or generous subsidies for low-income families to reduce the costs of homeownership. Although the orientation of several governments, particularly in Europe, has been to promote homeownership, economists have raised several concerns about the consequences of large homeownership shares on the functioning of the labour market. The analysis of the relation between the housing tenure and the labour market dates back to mid-nineties, when Andrew Oswald pinned on high homeownership rates the blame for the high unemployment rates in Europe (Oswald [1996], Oswald [1997], Oswald [1999]). Making use of aggregate data, Oswald found a strong positive statistical association between the two rates at the international and regional level. Thus, his receipt to reduce unemployment was strikingly at odds with the prevailing political wisdom: “We can put Europe back to work . . . by reducing homeownership” (Oswald [1999])1. Oswald identified five mechanisms that drive the positive impact on unemployment. These are mostly related to the idea that the mobility constraints imposed by homeownership introduce frictions in the labour market which harm its efficiency. The first and most important, is a direct effect. Owner occupiers incur higher transaction costs for selling home and moving to a new accommodation, which can be even higher whenever capital gains for houses are taxed and there are no exemptions. The other four mechanisms can be thought as externalities of homeownership. Second, where the rental market is thin, everyone, regardless of the housing tenure, can have difficulties in finding the accommodation close to the job they aspire to, so that efficient job matches are hindered. This is the case even for mobile people who would be happy to move for job reasons, such as young still living in the family-home in a kind of free-rent status. Third, owning the accommodation hampers also job-to-job changes and prolong poor job matches hence harming the whole economic system efficiency. Fourth, owner-occupiers are more likely than renters to lobby for deterring entrepreneurs from investing in their residential area. Fifth, since owners commute much more than renters, and over longer distances, higher homeownership rates in the area lead to higher transport costs and possibly to congestion costs, which make getting to work more costly for everyone and act as a sort of unemployment benefits in increasing the relative attractiveness of not working. Although the argument underlying a positive relationship between homeownership and unemployment originates from macroeconomic evidence, its theoretical foundations are mainly microeconomic and a vast part of the empirical research carried out subsequently has been based on micro data. The typical test of the so-called “Oswald thesis” consists in estimating the homeownership effect on the duration of the unemployment spell or, less often, on the probability to be unemployed. The expected sign is positive, along the main idea that higher mobility costs due to property holding reduce the willingness to accept job offers which require a residential move. Fewer studies, and only recently, have focused on the employment duration, testing whether homeownership can reduce job finding rates also for people already employed. Generally, empirical tests on micro data find no support for the Oswald hypothesis, and in most cases even that homeowners have shorter unemployment spells and lower likelihood to be unemployed, which are exactly counter-Oswald results. However, homeownership seems to increase job stability by hampering job-to-job changes for people already employed. As regards unemployment outcomes, the existing literature has put forward two possible reasons for the falsification of the Oswald hypothesis. The first one looks at the different effect of mobility costs on job search behavior in the local and in the non-local labour market. In fact, homeowners may have higher reservation wages for jobs which require a residential move (nonlocal market), but also lower reservation wages for jobs which do not (local market), so that job finding rates for the latter may be as high as to offset the lower rates for jobs in a distant area. Thus, whether the total job finding rate is lower for homeowners or for renters is just an empirical matter which depends on the magnitude of these two opposite effects. The second explanation points out the need for a refinement in the definition of the residential status. On the one hand, one should distinguish between owners who have to comply with mortgage payments and outright owners, as housing financial commitments can bear higher pressure to return to work or to keep on with the current job. For mortgage-holders, these financial constraints can counteract the effect of the reduced mobility due to ownership. On the other hand, unemployment outcomes can be different also for private and social renters. In fact, below-market rent, long waiting lists, security of tenure and the restricted transferability within social housing, can harm the relative performance of social renters. In this work, we aim at investigating the validity of the “Oswald thesis” taking into account the recent refinements by following both a theoretical and an empirical approach. The focus will be on UK micro data. In particular, we will make use of the two leading UK Surveys, the UK Quarterly Labour Force Survey and the British Household Panel Survey. In the first chapter, we investigate the relation between job search effort of unemployed and housing tenure. We test this relation focusing on the impact of the UK Jobseeker’s Allowance reform introduced in the UK in October 1996, whose main aspect was a strengthening of search requirements for eligibility to the unemployment benefit. We revisit a simple model of search in which we introduce moving costs and housing costs to capture the two channels through which the degree of attachment to the accommodation influences search behaviour. Our theory suggests that a tightening in job search requirements, as implied by this reform, raises movements off benefit of non-employed with low search intensity and that this effect should adjust in size depending on the different housing tenure. We draw a dataset from the Labour Force Survey for the period 1995-1997, and by means of a Difference-in-Differences approach we analyze the impact of the reform on the claimant outflow. Average Treatment Effect estimates suggest that the impact of the reform is related to housing tenure. Specifically, renters account for a major portion of claimants who were crowded out of the benefit without finding a job, while the effect on outright owners and mortgagers is lower. Empirical evidence from our dataset clearly confirms that mortgagers search for a job more intensively than renters, as our model predicts. This latter finding is consistent with a higher estimated treatment effect for renters, since a high initial search intensity seems the key to insulate oneself from the impact of the tightening of search requirements. In the second chapter we attempt to reconcile the empirical evidence with the argument in favour of a negative effect of homeownership on exit rates from unemployment. Taking into account some likely reasons for the falsification of the Oswald’s thesis, we provide evidence which supports it. At first, in a theoretical model of endogenous job search adapted to distinguish between local and non-local labour markets, we show that homeowners higher moving costs imply unambiguously lower search and lower job finding rates, even though an opposite effect works for jobs which do not require a move. Then, in the empirical analysis we make use of data drawn from the British Household Panel Survey to compare job search intensity measures by housing tenure. In defining the residential status, we distinguish between outright owners and mortgage-holders, and between social and private renters. We find that, controlling for housing costs and for the four-fold tenure definition, non-employed outright owners have definitely a lower attachment to the labour market than renters, and that this effect is even more evident when we compare them to private renters. In the third chapter, we analyse the impact of the housing tenure on labour market outcomes using individual data from the UK labour Force Survey. We estimate both a binary model for the probability to be unemployed and a hazard model for exits out of unemployment. In both models we test for endogeneity of housing tenure. In the binary model, exogeneity is rejected so we perform endogenous multinomial treatment effects estimates. In the hazard model, we find no evidence of unobserved heterogeneity thus estimates are performed assuming exogeneity. Results show that mortgagers have the lowest probability to be unemployed and the highest job finding rates, while social renters exhibit the worst performance. Whether private renters perform better than outright owners is a matter of debate: while we have no evidence in favour of this claim, the evidence in favour of the opposite is only modest