Do high levels of home-ownership create unemployment? Introducing the missing link between housing tenure and unemployment

Abstract

A large number of studies have demonstrated that the proportion of home-owners in a region tend to be positively associated with the unemployment levels in that region. In this paper, we introduce a missing piece of explaining this commonly found pattern. By analysing individual-level population register data on Sweden, we jointly examine the effects of micro- and macro-level home-ownership on individuals’ unemployment. The findings indicate that even though home-owners have a lower probability of being unemployed, there is a penalty for both renters and home-owners on unemployment in regions with high home-ownership rates. Differences in mobility patterns cannot explain this pattern. However, when labour market size is considered, the higher probability of unemployment in high home-owning regions is drastically reduced. This suggests that high home-ownership regions tend to coincide with small labour markets, affecting the job matching process negatively.

Keywords:

• Home-ownership
• unemployment
• regional labour market
• job matching
• mobility
• Sweden
• register data

Acknowledgements

This paper has benefitted from the helpful comments provided by three anonymous reviewers. We are also grateful for comments and suggestions from colleagues and conference participants where previous versions of this paper have been presented.

Notes

1. Note that we do not know if an individual who lives in a dwelling where residents in general own their apartments, also owns her apartment. If for instance an individual is subletting an owned apartment, she will appear to own an apartment in our data. This is a drawback in the data on an individual level; however, it has no effect on our macro level estimates as it does not affect the overall proportion of owned housing.