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User Cost Changes, Unemployment and Home-ownership: Evidence from Spain

Departamento de Economía Aplicada, Facultad de CC. EE. y Empresariales, Universidad de la Laguna, Campus de Guajara, sln. 38071, Tenerife, Canary Islands, Spain, jabarrio{at}ull.es

Jose E. Rodriguez Hernandez

Departamento de Economía Aplicada, Facultad de CC. EE. y Empresariales, Universidad de la Laguna, Campus de Guajara, sln. 38071, Tenerife, Canary Islands, Spain, jerodri{at}ull.es

This paper develops a macroeconomic model that permits analysis of the relationship between unemployment and home-ownership rates using aggregate data at the provincial level within Spain, besides other influential variables such as the changes of the relative user costs of owning and renting or household life-cycle attributes. The model constructed permits the authors to question the evidence of Oswald, Nickell and Layard, and partially of Green and Hendershott, that home-ownership leads to higher unemployment. The results point out that, taking into account the simultaneity determination issue and reducing the omitted variable bias, a higher unemployment discourages home-ownership.

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