Adjustment in Local Labour and Housing Markets

This paper analyses local labour and hosuing market adjustment in New Zealand from 1989 to 2006. We use a VAR approach to examine the adjustment of employment, employment rate, participation rate, wages, and house prices in response to employment shocks. Migration is a major adjustment response at both a national and regional level. Nationally, a 1% positive employment shock leads to a long-run level of employment 1.3% higher, with half of the extra jobs filled by migrants. A 1% region-specific employment shock raises the long-run regional share of employment by 0.5 percentage points, due entirely to in-migration. House price responses differ at different spatial scales. Nationally, house prices are very responsive to employment shocks: a 1% employment shock raising long run house prices by 6% , as may be expected with an upward sloping housing supply curve. Paradoxically, this relationship does not hold at the regional level.

[1]  G. Meen.  Modelling Spatial Housing Markets: Theory, Analysis and Policy , 2001 .

[2]  David C. Maré,et al.  Moving to Jobs? , 2003 .

[3]  Arthur Grimes,et al.  What's the Beef with House Prices? Economic Shocks and Local Housing Markets , 2004 .

[4]  Lawrence F. Katz,et al.  Regional Evolutions , 2007 .

[5]  P. Fredriksson.  The Dynamics of Regional Labour Markets and Active Labour Market Policy: Swedish Evidence , 1995 .

[6]  A. Spilimbergo,et al.  How Do the Skilled and the Unskilled Respond to Regional Shocks? The Case of Spain , 1998, SSRN Electronic Journal.

[7]  J. Vickery,et al.  Labour Market Adjustment: Evidence on Interstate LabourMobility , 1999 .

[8]  Arthur Grimes,et al.  Defining Areas: Linking Geographic Data in New Zealand , 2006 .

[9]  Helmut Lütkepohl,et al.  COMPARISON OF BOOTSTRAP CONFIDENCE INTERVALS FOR IMPULSE RESPONSES OF GERMAN MONETARY SYSTEMS , 2001, Macroeconomic Dynamics.

[10]  David C. Maré,et al.  Modelling Regional Labour Market Adjustment in New Zealand , 2002 .

[11]  Antonio Fatás,et al.  Regional labor market dynamics in Europe , 1995 .

[12]  Viv Hall,et al.  Would Adopting the Us Dollar Have Led to Improved Inflation, Output and Trade Balances for New Zealand in the 1990s? , 2003 .

[13]  Arthur Grimes,et al.  Is There Long-run Convergence among Regional House Prices in the UK? , 2005 .

[14]  A. Spilimbergo,et al.  How Do the Skilled and the Unskilled Respond to Regional Shocks? The Case of Spain , 1998 .

[15]  Inessa Love,et al.  Financial Development and Dynamic Investment Behavior: Evidence from Panel Vector Autoregression , 2002 .

[16]  Arthur Grimes,et al.  Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand , 2004 .

[17]  Steven Stillman,et al.  Examining Changes in the Value of Rural Land in New Zealand between 1989 and 2003 , 2005 .

[18]  Arthur Grimes,et al.  Is There Long-Run Convergence of Regional House Prices in the UK? , 2005 .