Job Match and Housing Tenure Self-Selection

Abstract

Homeownership, though it brings both private and social benefits, entails substantial fixed costs. Indeed, standard personal financial advice suggests that homeownership should only be undertaken when one’s job situation is stable and job movement is not likely in the near future. Very little research has asked whether this advice is followed, so our goal is to rectify that omission. We construct a theoretical model where the decision to become a homeowner only occurs when the householder is employed at a job with productivity that matches their ability. To test our model, we employ detailed information on workers and housing decisions from Danish administrative data. We construct a measure of job mismatch and find evidence suggesting that homeowners are indeed better matched at their jobs than renters, and that an improved match leads renters to become homeowners. An examination of job durations suggests that homeownership is correlated with longer job duration both because of a direct causal effect and also due to an indirect effect through selection into homeownership.