Home-ownership and unemployment: revisiting the Oswald hypothesis from a regional heterogeneity perspective

Home-ownership may create both positive and negative externalities. As an example of a negative externality, the so-called Oswald hypothesis suggests that a high home-ownership rate creates frictions in the economy and thus increases the unemployment rate. We approach this hypothesis from a novel perspective by taking into account regional differences in population density and dwelling composition. Using municipality-level panel data, we find that although the phenomenon identified by the Oswald hypothesis may not be omnipresent, it may manifest itself, particularly in semi-urban areas where the share of large ownership dwellings is high. We also find that in-migration to these areas is lower, which is consistent with the view that the home-ownership rate may affect migration flows and, thus, economic dynamics.