Abstract
While the job search literature has increasingly recognised the importance of the spatial distribution of employment opportunities, local labour market conditions have been a notable omission from much of the empirical literature on commuting outcomes. This study of the commute times of dual earner couples in England and Wales finds that local labour market conditions are closely associated with commute times and their effects are not gender neutral. Male commute times are much more sensitive to local unemployment rates than women’s; where women earn less than one–third of household income, their commute times do not seem to be sensitive to local unemployment. In addition, the more conducive the local labour market is to female employment, the less time women spend commuting. On average the ‘female friendliness’ of the local labour market has no effect on male commute times, but in households where women earn the majority of household income, men commute further if the local labour market is female friendly. We also show that it is important to account for the heterogeneity of household types; there are important differences in our results according to female income share, housing tenure, mover status and mode of travel.
Highlights
We show that monetary policy conditions matter for household asset allocation
We have employed data on US household financial portfolios along with two measures of monetary policy shifts, based on actual and unexpected changes in the Federal Funds Rate (FFR), over the period 1999-2007, to explore how households react to changes in monetary policy
Our Fractional Response Model (FRM) findings show that expansionary monetary policy is associated with higher household portfolio allocation to high risk assets and lower allocation to low risk assets
Summary
We show that monetary policy conditions matter for household asset allocation. The recent experience of historically low interest rates in the US, as well as in other countries, has stimulated a body of research on the effects of monetary policy on financial markets and the real economy. The effect of monetary policy changes on the decision to hold high or low risk assets as well as the associated portfolio shares is statistically insignificant for households that are the most tolerant towards risk, suggesting that the asset allocation decisions of such households are motivated by other factors. In a similar spirit to our paper, Lian et al (2019) conclude that US household investment decisions are characterised by reaching for yield when monetary policy is expansive (i.e. low short-term interest rates) Their empirical analysis is conducted at the aggregate, rather than the household, level, using Flow of Funds data on household sector flows into stocks and interest-bearing safe assets. Unlike our study, Luetticke (2020) considers the cross-sectional response of household consumption to monetary policy shocks; see among others, Jappelli et al (2018) and Cloyne et al (2019)
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