The Housing Channel of Labor Market Turnover

with  Benjamin Born (University of Bonn) and Pascal Frank (University of Notre Dame)

Abstract:

We estimate the dynamic effect of housing turnover on labor market turnover in the United States. Using state-level panel data from 2001 to 2019 and a local projections instrumental variables framework, we exploit high-frequency monetary policy surprises as an exogenous source of variation in housing turnover. A one percentage point decline in housing turnover— comparable in magnitude to one standard deviation—leads to a persistent reduction in labor market turnover of about 0.3 percentage points over three years. The effect is stronger in states with higher homeownership rates, consistent with a mortgage lock-in channel. A decomposition analysis reveals that housing turnover accounts for at least two thirds of the impact transmission from monetary policy to labor market turnover. Results are robust to using an alternative instrument based on global economic activity, alternative measures of both housing and labor market turnover, and a range of further specification checks.