Regional reallocation and housing markets in a model of frictional migration
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Original versionReview of Economic Dynamics, 18(2015)4:863-880 10.1016/j.red.2015.08.002
Migration frictions are important for understanding key features of gross migra- tion and housing markets. This paper studies a multi-region equilibrium model with frictional migration. Idiosyncratic preference shocks, a mobility cost, and imperfectly directed migration lead to slow worker reallocation in response to changes in local conditions. This leads to a dependence of local house prices on the history of labor market shocks. The model accounts for the comovements of unemployment and rental and house prices with gross migration observed in a panel of U.S. cities. Structural estimation reveals a high mobility cost for unemployed workers and a low probability of directed migration. Both of these imply that regional reallocation has a limited importance for the aggregate labor market and that the e ects of housing markets on reallocation are small.
This is the author's accepted and refereed manuscript of the article