New evidence of the effect of transaction costs on residential mobility

Transaction costs have attracted considerable attention in the theoretical literature on residential mobility. In many European countries, these costs mainly consist of ad-valorem transaction costs. In the current paper, we demonstrate empirically for the Netherlands that the transaction costs have a strong negative effect on the owners' probability of moving. Under a range of different specifications, it appears that a one percent-point increase in the value of transaction costs - as a percentage of the value of the residence - decreases ownership to ownership residential mobility rates by eight percent. Our estimates are consistent with the observation that in the Netherlands ad-valorem transaction costs mainly consist of buyer transaction costs.

The effects of home-ownership on labour mobility in the Netherlands: Oswald's theses revisited

This paper examines the hypotheses presented by Oswald (1999) for the Netherlands. These are: I) Home-owners are less likely to move than renters, II) Unemployed home-owners are less likely to move than unemployed renters, III) Owners of houses are less likely to move to another job, because they are not willing to leave the� region and IV) Owners of houses are more likely to become unemployed. Using individual data of a panel of labour market and housing market histories for the period 1989-1998, we estimate a hazard rate model, that explain transitions on these markets. We find evidence for the Oswald theory in two cases: employed home-owners are less likely to move than renters are, and employed home-owners are less likely to change jobs than renters are. However, from these results alone we cannot conclude that employed workers that own a house have worse labour market positions than renters. Instead, their commitment to jobs makes them less vulnerable for unemployment. Also, Oswald's theory does not seem to hold for unemployed workers or nonparticipants. Instead, unemployed home-owners are even more inclined to move than renters.

The Importance of Income and Housing Wealth Constraints for Future Residential Mobility

We investigate the size of the mark-up on the lending rate for endowment mortgages, due to expected prepayment by the borrower. For this type of mortgage, prepayment is mostly the result of mobility in the housing market. We control for the risk of default by using a unique data set of Dutch borrowers insured against default. The estimates indicate that households with a higher liquidity constraint are less likely to prepay, as they have a lower mark-up on the lending rate. In contrast, the collateral constraint has a very limited influence on the mark-up. We explain this result as follows. Usually, income constraints are generated at the household level, whereas constraints on housing wealth pertain to the regional level. Hence, income changes may improve the relative position of households in the housing market, but an increase in homeowners. housing wealth does not improve their relative position in the housing market.Mortgage market, Prepayment, Lending rate, Liquidity constraint, Collateral constraint, Residential mobility

Duration dependence in unemployment insurance and social assistance; consequences of profiling for the unemployed

It is well-known that the probability of an unemployed person finding a job decreases over the unemployment spell. On the one hand, this results from duration dependence at the individual level: unemployed job seekers may become discouraged, loose their working skills and become stigmatised by potential employers (‘pure' individual effects). On the other hand, if there is variation between individual exit rates, there is dynamic sorting of the unemployed with low exit probabilities (‘sorting effects'). Based on Dutch micro-data of social assistance (SA) and unemployment insurance beneficiaries (UI) for 1989-1996, we investigate to what extent this so-called ‘negative duration dependence' is due to sorting effects, as well as ‘pure' individual effects. The analysis suggests that after an unemployment spell of half a year, the decrease in the job finding rate for SA recipients can be attributed for 20% to 25% to sorting effects. After a three- to four-year period, the probability to find a job deteriorates further, but only due to individual duration effects. For UI recipients, similar results are found. From this, we conclude that profiling measures that target the inflow of unemployed with bad job prospects bear an important risk: unemployed that are initially classified as having good job prospects may also become long-term unemployed. Therefore, labor market policies should also focus on general measures, for example, by encouraging search activities of all workers that have spent a certain length of time in unemployment.

“The Impact of Housing Market Institutions on Labour Mobility: A European Cross-Country Comparison.” ENEPRI Working Paper No. 54, July 2007

This paper examines the effects of housing market institutions on labour mobility. The authors construct durations for individuals leaving their current job for a different job, becoming unemployed or leaving the labour market, from a sample of households from 14 European countries in 1994-2001. This data are then merged with country-specific housing market institutions, such as transaction taxes, and language and religion diversity. Similar to previous studies, estimated hazards indicate that home-ownership reduces job-to-job mobility as well as the probability to become unemployed or economically inactive on an individual level. However, a comparison between countries reveals that countries with high levels of home-ownership rates also have high levels of unemployment. Therefore, this paper is able to reconcile the seemingly contrasting empirical results from both the macroeconomic and the microeconomic level

The impact of homeownership on unemployment in the Netherlands

We analyze the impact of homeownership on unemployment duration using a theoretical model of job search. Earlier studies suggest that this relationship should be positive because workers are less mobile when they own a home. Nevertheless, most of the empirical studies in Europe find an opposite relationship. In this paper, we investigate whether this is due to an omission in the original analysis or whether it is due to an endogeneity problem, i.e. those who can leave unemployment easily are more likely to be a homeowner. In our empirical analysis, we use additional information about the differences in unemployment benefits between homeowners and renters. We find that homeowners have higher hazard rates out of unemployment to a job in the local labour market. The impact is significant but not very large. Homeownership has a negative but insignificant impact on the hazard to leave unemployment to the non-local labour market. Finally, we find that homeowners would reduce their probability to receive a job offer from the local labour market when they become renters. The probability to receive a job offer from the non-local labour market would increase for short spells of unemployment when home owners become renters. However, this probability would be reduced for long spells of unemployment.

Four Futures for Finance; A scenario study

This document presents four scenarios for the future of finance. The goal of our study is to imagine the future of finance and to identify challenges faced by policymakers in fighting systemic risk. It builds upon a tradition within the CPB to develop scenarios for policy analysis. We develop four scenarios for the future of finance. Our scenarios differ in two dimensions. First, to what extent soft information lies at the core of banks’ business. Second, to what extent scope economies exist between different banking activities. By combining these two dimensions, we obtain four scenarios: Isolated Islands, Big Banks, Competing Conglomerates, and Flat Finance. Market structure, market failures, and government failures vary between scenarios. These differences then translate into differences in the complexity of balance sheets, the ability to coordinate policy internationally, the information gap faced by regulators, the size of banks’ balance sheets, the tradability of banks’ assets, the level of interconnectedness, the potential for market discipline, and the threat of regulatory capture. As a result, each scenario calls for a different set of policies to combat systemic risk.

A new approach to measuring competition in the loan markets of the euro area

This paper is the first that applies a new measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major EU countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks. JEL Classification: D4, G21, L1Banking industry, competition, loan markets, marginal costs, market shares

Reduce tax on residential mobility

How can Europe increase structural growth? This column argues that labour market flexibility is key. As a major barrier to labour movement is rigidity in the housing market, abolishing transfer taxes on residential property could result in gains of up to 0.4% of GDP

New Evidence of the Effect of Transaction Costs on Residential Mobility

Transaction costs have attracted considerably attention in the theoretical literature on residential mobility. In many European countries, these costs mainly consist of ad-valorem transaction costs. In the current paper, we demonstrate empirically for the Netherlands that the transaction costs have a strong negative effect on the owners' probability of moving. Under a range of different specifications, it appears that a one percent-point increase in the value of transaction costs - as a percentage of the value of the residence - decreases ownership to ownership residential mobility rates by eight percent. The estimates imply that ownership to ownership mobility rates would be 50 percent higher in the absence of the current six percent ad-valorem buyer transaction tax. Our estimates are consistent with the observation that ad-valorem transaction costs mainly consist of buyer transaction costs