The effect of homeownership on the option value of regional migration

Abstract

This paper estimates a lifecycle model of consumption, housing choice, and migration in the presence of aggregate and regional shocks, using the Survey of Income and Program Participation (SIPP). The model delivers structural estimates of moving costs by ownership status, age, and family size that complement the previous literature. Using the model, I first show that migration elasticities vary substantially between renters and owners, and I estimate the consumption value of having the option to migrate across regions when there are regional shocks. This value is 19normal% of lifetime consumption on average, and it varies substantially with household type.

Implications of US Tax Policy for House Prices, Rents, and Homeownership

“…The IV estimate of the elasticity parameter, shown in Table 3, is ˆ ε IV = 0.9025 , with a standard error of 0.171 . 24 The estimated price elasticity of supply falls within the relatively wide range of values found in the literature. The empirical framework that is perhaps most similar to ours is Poterba (1984).…”

“…These variables had little explanatory power, and did not change the estimated elasticity appreciably. As a result, we set the elasticity using the univariate, IV model 24. For comparison purposes, the OLS estimate of ˆ ε OLS is 1.0024.…”

The Housing Stock, Housing Prices, and User Costs: The Roles of Location, Structure, and Unobserved Quality

“…For instance, Chambers et al. (2009a, 2009b), Chen (2010), and Oswald (2019) incorporate higher maintenance costs for rentals and a limited supply of “high‐value” rentals into their models. We show that selection due to unobservables can simultaneously explain both higher maintenance costs and the limited supply of physically valuable rentals.…”

Labour market institutions for an ageing labour force in Slovenia

“…Housing rental provides greater career flexibility, with lower reallocation costs when accepting an employment opportunity elsewhere. This can lead to more dynamic labour markets, lower mismatches and higher productivity (Oswald, 2019). Renting also provides higher financial flexibility (Banks, Blundell, Oldfield and Smith, 2012).…”