Homeownership is believed to cause higher unemployment. This is because homeowners face higher mobility costs that limit their job search to local labor markets. Empirical tests of this prediction have yielded mixed results so far, possibly due to the endogeneity of homeownership. This paper proposes that the privatization of public housing in Central and Eastern Europe after the fall of the Iron Curtain was a substantial policy shock that generated largely exogenous assignment of homeownership to individual households. This facilitates a new test of the effects of homeownership on mobility and unemployment: First, our empirical results do not reject that homeownership reduces mobility. Second, our results are inconsistent with homeownership increasing unemployment.
- Housing privatization