MOBILITY AND TENURE CHOICE
||Andolfatto, David; Martin Gervais; Gabriel Lee
||MOBILITY AND TENURE CHOICE
||Book of Abstracts: 15th Annual European Real Estate Society Conference in Kraków, Poland
||The objective of this paper is to address the questions what explains the cross-country variation in mobility (agents that change both jobs and residence), and is labor mobility related to tenure mode? The basic framework of the model is where the economy consists of two symmetric locations; with each location populated by 2-period-lived overlapping generations (and an initial old generation). A representative young agent has preferences defined over time-dated consumption and shelter services. For simplicity, we assume that agents must consume one unit of shelter in each period. Furthermore, we assume that agents do not value consumption when young and have linear preferences defined over consumption when old. Even in this simple economic environment, we show that the housing tenure choice largely depends on the probability of labor (income) shocks that triggers the agents to move. Moreover, we show the effects of housing frictions such as the transaction costs and the rental premium due to externalities on housing tenure choice.
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