Geographical Mobility and the Labour Market

IKERLANAK, Working Paper Series IL. 90/15

This paper studies the effect of home-owners' migration costs on migration and unemployment in an economy where workers move both for work- and nonwork-related reasons. To this end, a search model with heterogeneous locations is developed and calibrated to the U.S. economy. Consistent with the empirical evidence, the model predicts that home-owners have a lower unemployment rate than
renters despite their higher migration costs. The result is due to home-owners' higher transition rate to employment and lower transition rate to unemployment. In addition, the model generates lower inequality in home-owners' local unemployment rates than in renters'. In line with this result, it is documented that, for the period 1996-2013, home-owners had less unemployment dispersion across metropolitan areas than renters.

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