Working Paper: CEPR ID: DP6543
Authors: Olympia Bover; Juan Francisco Jimeno
Abstract: Over the last decade house prices increased remarkably in many countries. However, while in several countries there was an employment boom in the construction sector, in others the share of employment in this sector did not significantly change. In this paper we estimate a model of labour demand in the construction sector, featuring building constraints, which explains many of the international differences in the response of sectoral reallocation of employment to house prices. Countries with more building possibilities (Spain, Sweden and the US) have a high sectoral reallocation of employment, and display larger elasticities of labour demand in the construction sector with respect to house prices than countries that seem to have fewer building possibilities (Belgium, the Netherlands, and the UK). Nevertheless, our estimates imply that, for the whole economy, the elasticity of labour demand with respect to house prices is broadly similar across countries.
Keywords: house prices; labour demand; sectoral reallocation of labour
JEL Codes: J23; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| house prices (R31) | labor demand in the construction sector (J23) |
| house prices (R31) | ratio of labor demand in construction sector to labor demand in rest of economy (J49) |
| building possibilities (L74) | elasticity of labor demand in construction sector (J23) |
| building constraints (L74) | labor demand in construction sector (J23) |
| building constraints (L74) | ratio of labor demand in construction sector to labor demand in rest of economy (J49) |
| country differences in building possibilities (L74) | sectoral reallocation of employment in response to house prices (J69) |
| building constraints (L74) | macroeconomic implications (unemployment and productivity growth) (E24) |