Did the post-1986 decline in the homeownership rate benefit the New Zealand labour market? A spatial-econometric exploration

William Cochrane*, Jacques Poot

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The proportion of New Zealand households living in owner-occupied dwellings has declined steadily since the early 1990s. The unemployment rate declined steadily as well, except for upward shifts due to the late 1990s Asian Financial Crisis and the Global Financial Crisis a decade later. Research initiated by Andrew Oswald in the 1990s posits that declining homeownership and declining unemployment are linked and that the causality runs from high homeownership leading to high unemployment. The international empirical evidence for this hypothesis is rather mixed. In this paper, we revisit the issue with New Zealand census data for commuting-defined labour market areas from 1986 until 2013. Allowing for spatial spillovers in our data, we apply a general nesting spatial-econometric model. We also consider the potentially different impacts of freehold and mortgaged homeownership. Generally, the evidence that a declining homeownership rate contributes to a lower unemployment rate is statistically fragile. When statistically significant, an increase of 1% in freehold ownership appears to increase a labour market area’s unemployment rate by between 0.07 and 0.2% points. The effect is relatively stronger in those labour market areas where freehold ownership is still relatively low.

Original languageEnglish
Pages (from-to)261-284
Number of pages24
JournalAsia-Pacific Journal of Regional Science
Volume4
Issue number1
Early online date30 Jan 2020
DOIs
Publication statusPublished - Feb 2020

Bibliographical note

Publisher Copyright:
© 2020, The Japan Section of the Regional Science Association International.

Keywords

  • Homeownership
  • Labour market flexibility
  • Oswald hypothesis
  • Spatial econometrics
  • Unemployment

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