Homeownership, the unemployed and financial hardship

Abstract

We follow 3,826 Australian unemployed persons, approximately half of whom are homeowners. We conduct a matching analysis and find that homeownership reduces both experienced and perceived financial hardship. Building on recent findings in the literature that the presence of financial hardship deteriorates job search quality (i.e., stressors like financial hardship lead to the adoption of haphazard rather than focused job search strategies), we introduce financial hardship as a novel channel through which homeownership affects labour market outcomes of the unemployed. In our matching analysis, we include historical labour market performance and personality traits linked to mobility preferences, to address endogeneity. We also confirm that homeownership reduces residential mobility and increases neighbourhood social capital but find no effect on reservation wages of the unemployed. Considering declining homeownership rates across the OECD in recent years, our findings are both timely and imperative to understand the effect of homeownership on labour market outcomes of the unemployed.