Modelling structural change in the UK housing market: A comparison of alternative house price models

This paper develops a new approach to the modelling of house prices in the UK, with housing demand being conditioned directly on consumers' expenditure rather than the determinants of expenditure. Conditioning on consumption ensures that the permanent income measure used in determining the level of consumption is consistently reflected in housing demand. The effects of financial liberalisation on the relative consumption of housing and non-housing goods and services are captured using the average loan-value ratio for first-time buyers. We also allow for financial effects via the real user cost of home ownership. House prices are assumed to adjust so as to clear the housing market. The proposed model is found to have structurally stable parameters across the housing market downturn since 1990. Statistical comparisons with the more conventional models in use at HM Treasury and the Bank of England during the early 1990s provide additional evidence in favour of our proposed approach.     

Comparable worth in a decentralized labour market: the case of Ontario

Abstract.  We document the application of pro‐active pay equity legislation to the private sector of the Canadian province of Ontario in the early 1990s. We report substantial lapses in compliance among smaller firms where the majority of men and women work. We also find that the pay equity law had no effect on aggregate wages in female jobs or on the gender wage gap. This experience provides unique perspectives on (1) the tensions between the workings of a decentralized labour market and the principles of comparable worth and (2) the obstacles to its extension to the private sector. JEL classification: J7, J3     

Job market outcomes for IDPs: The case of Georgia

Internally displaced people (IDPs) constitute a serious economic, social and cultural problem for many countries, including countries in transition. Despite the importance of the problem, there are only a handful of previous studies investigating the issue of labour market outcomes for IDPs. Moreover, the impact of protracted displacement has not been addressed in academic work at all. We aim to fill this gap in the literature using 13 years (2004–2016) of Integrated Household Surveys from Georgia, which has experienced a large flow of internal migrants from the early 1990s until now. Our analyses indicate that the labour market outcomes for IDPs are much worse than those for local residents. Specifically, IDPs are 3.9–11.2 percentage points less likely to be in the labour force, depending on the period and duration of IDP status. IDPs are also up to 11.6 percentage points more likely to be unemployed, even after 20 years of forced displacement. Finally, IDPs residing in a locality for more than five years receive persistently lower wages than local residents with similar characteristics, with the gap widening over time, reaching some 11% in the last period under analysis.     

AGGREGATE EMPLOYMENT DYNAMICS AND (PARTIAL) LABOUR MARKET REFORMS

European labour markets have undergone several important innovations over the last three decades. Most countries have reformed their labour markets since the mid‐1990s, with the liberalization of fixed‐term contracts and temporary work agencies being the common elements to such reforms. This paper investigates the existence of a change in the dynamic behaviour of the aggregate employment for major European Union countries – France, Germany, Italy and Spain. According to our results, partial labour market reforms have made the response of the aggregate employment to output shocks larger and quite comparable to that found for the UK – the most flexible labour market in Europe since the Thatcher reforms.     

Rent control and unemployment duration

In this paper we analyse how rent control affects the duration of individual unemployment. In a theoretical search model we distinguish between two effects of rent control. On one hand, rent control reduces housing mobility and hence mobility in the labour market. On the other hand, to maintain rent control benefits, unemployed individuals are more likely to accept job offers in the local labour market. Based on a rich Danish data set, we find that the probability of finding a local job increases with the rent control intensity of the housing unit, whereas the probability of finding a job outside the local labour market decreases with the rent control intensity.     

Housing booms and media coverage

This article analyses news media coverage of the housing market. Building on theories of media influence where word of mouth is the final mechanism of opinion change but media initiate discourse, I examine the relationship between news media and the recent UK house price boom. Over 30 000 articles on the UK housing market from the period 1993 to 2008 are analysed, and it is found that media Granger-caused real house price changes, suggesting the media may have influenced opinions on the housing market. However, media sentiment on the housing market did not change with the secular increase in house prices in the 2000s, suggesting that the media did not contribute to the UK’s housing boom and may have helped constrain it.     

Boom in,bust out: Young households and the housing price cycle

The UK experienced a major residential real estate boom–bust cycle from the mid-1980s to the mid-1990s, accompanied by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode, with little to say about the differential effects on various age groups. We show that, in a life-cycle model with income heterogeneity and credit constraints, the observed co-movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks. Our findings suggest that the financial liberalisation of the early 1980s was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom.     

Fewer in Number but Harder to Employ: Incidence and Duration of Unemployment in an Economic Upswing

During an upswing in the Norwegian labour market in the early 1990s, inflow to unemployment fell by one-quarter from October 1991 to October 1993. In contrast, the employment probabilities of the inflow rose much less for males and even decreased for females. A duration analysis showed that the average "employability" of the unemployment inflow declined due to lower previous income, a lower proportion with job experience, a higher proportion with previous unemployment experience, a higher proportion with immigrant background, and a lower proportion on recall. They were fewer in number, but harder to employ.
JEL classification : E 32; J 64     

The impact of sectoral shifts and the aggregate labour market on unemployment duration

This study investigates the effects of sectoral shifts among industries on unemployment duration. These effects are decomposed into two subeffects: the overall effect and the specific industrial effect. The former is equal for all of the unemployed in all industries, while the latter depends on the tightness of the demand for labour of the industry in question. In addition, the impact of the aggregate labour market on unemployment duration is also explored. The empirical results show that most of the overall and all of the specific effects are significant, indicating that the sectoral shifts among industries as well as the aggregate labour market do in fact impact unemployment duration, and that the effects on unemployment duration vary in terms of their tightness in the different industrial labour markets.     

Human capital accumulation in an open labour market: Ireland in the 1990s

Large-scale investment in education in Ireland began in 1967 and has led to a dramatic increase in the relative supply of skilled labour over the past four decades. Furthermore the supply of labour in Ireland is traditionally highly elastic through migration, which in the 1990s was predominantly high-skilled. This combination of rising education levels and an open labour market meant that employment and incomes rose rapidly in the 1990s, while Ireland still maintained a strong competitive position in terms of relative labour costs.In this paper we develop a new macro-economic framework to formally analyse these mechanisms. We estimate a small structural model of the Irish labour market, separately identifying high-skilled and low-skilled labour. We find that this model captures key characteristics of the Irish labour market in the 1990s.     

Canadian regional labour market evolutions: a long-run restrictions SVAR analysis

Canada's high reliance on commodities can work against its constitutionally mandated goal of regional equity in economic development, while also inhibiting macroeconomic performance and limiting monetary policy effectiveness. Yet, flexible and integrated regional labour markets can help achieve both equity and macroeconomic goals. Therefore, this study examines the dynamics of Canadian provincial labour markets using a long-run restrictions structural vector autoregression (SVAR) model. Labour market fluctuations are decomposed into the parts arising from shocks to labour demand (new jobs), labour supply through migration (new people) and internal labour supply (original residents). The results suggest that demand innovations primarily underlie provincial labour market fluctuations. Despite significant geographic and language barriers that could impede their performance, there also is little overall evidence to suggest that provincial labour markets are more sluggish or less flexible than US state labour markets. Finally, original residents benefit slightly more from increased provincial labour demand compared to findings for US states.     

Forecasting UK house prices: A time varying coefficient approach

Previous studies of UK house prices, developed from the demand and supply ofhousing or from the asset market approach have been poor in terms of robustness and ex-post forecasting ability. The UK housing market has suffered a number of structural changes, particularly since the early 1980s with substantial house price increases, financial market deregulation and the removal of mortgage market constraints through competition. Consequently, models which assume that the underlying data-generating process is stable and apply constant parameter techniques tend to suffer in terms of parameter instability. This article uses the Time Varying Coefficient (TVC) methodology where the underlying data-generating process in the UK housing market is treated as unstable. The estimation results of the TVC regression of UK house prices is compared with those obtained from three alternative constant parameter regressions. Comparisons of forecasting performance suggest the TVC regression out-performs forecasts from an Error Correction Mechanism (ECM), Vector Autoregressive (VAR) and an Autoregressive Time Series regression.     

International cross-listing and stock market development in emerging economies

Why have emerging equity markets grown so rapidly since 1990? First, it is shown how international cross-listings can transform a segmented local equity market from an equilibrium of low liquidity and market capitalization to an integrated market with high liquidity and market capitalization by altering the incentives of companies and individuals to participate in the market. Second, benefits of international cross-listings for domestic stock market development and welfare across emerging equity markets are found to be negatively related to both the degree of correlation between the domestic and world equity market and the relative size of the domestic equity market. Third, the price impact of international listing is shown to depend on the liquidity conditions in the domestic market prior to listing.     

A prospective analysis of labour market status and self-rated health in the UK and Russia

Comparing prospective data from the UK and Russia, this paper analyzes whether the association of labour market status, and particularly unemployment, with subsequent health varies by the level of state protection provided to the unemployed. While the UK's unemployment welfare regime is classified as providing minimal protection, the Russian regime is sub-protective. Employing Cox duration analysis upon data from the Russian Longitudinal Monitoring Survey and the British Household Panel Survey for the period 2000–2007, this study finds that labour market status and economic circumstances independently predicted individual-level declines in self-rated health and, contrary to expectations, the associations of unemployment with health decline were similarly sized in the two countries.     

Has the structural break slowed down growth rates of stock markets?

In this paper, we use the common structural break test suggested by Bai et al. (1998) to test for a common structural break in the stock prices of the US, the UK, and Japan. On the basis of the structural break, we divide each country's stock price series into sub-samples and investigate whether or not the structural break had slowed down the growth of stock markets. Our main findings are that when stock markets are modelled in a trivariate sense the common structural break turns out to be 1990:02, with the confidence interval including several episodes, such as the asset price bubble when housing prices and stock prices in Japan reached a peak in 1988/1989, the early 1990s recession in the UK, the business cycle peak of July 1990, the August 1990 Iraqi invasion of Kuwait and the March 1991 business cycle trough. Annual average growth rates suggest that the structural break has slowed down the growth rate of the US, the UK and Japanese stock markets.     

Did the pattern of aggregate employment growth change in the euro area in the late 1990s?

This paper examines whether the pattern of growth in euro area employment seen in the period 1997 to 2001 differs from that recorded in the past and what could be the reasons. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment ‘inertia’, can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997 to 2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment.     

WHAT CAN CHANGES IN STRUCTURAL FACTORS TELL US ABOUT UNEMPLOYMENT IN EUROPE?

This paper examines the impact of temporal variation in labour market institutions and other structural factors on unemployment in Europe. A system comprising a labour demand and a wage equation is estimated on pooled time‐series data for the six largest EU countries for the 1980s and 1990s. The results suggest that changes in regional mismatch, trade union density and the ratio between consumer and producer prices are positively associated with structural unemployment. This result is robust to a wide variety of different specifications. No consistent role is found for other institutional factors (such as social security benefits, employment security and minimum wage).     

University quality and labour market outcomes

This paper uses proxies for university quality derived from the Research Assessment Exercise and the Teaching Quality Assurance Agency to assess the impact of university quality on the labour market outcomes of a cohort of UK graduates. The impacts on job quality and earnings were mainly limited to graduates in particular disciplines or those obtaining ‘poor’ degrees from ‘good’ universities. The results suggest that, after controlling for pre-entry qualifications, labour market outcomes for most graduates depended more on the subject studied and degree classification awarded than on the university attended.     

UK Trade Performance and the Role of Product Quality, Innovation and Hysteresis: Some Preliminary Results

This paper seeks to explain the apparent contradiction in the UK's manufacturing trade performance over the past two decades: on the one hand, the early 1980s witnessed a substantial contraction in manufacturing employment along with a considerable surge in imports and decline in UK exports; on the other hand, UK trade performance, particularly exports, seems to have improved in the second half of the 1980s and early 1990s. The paper shows that the substantial, but temporary , appreciation of sterling in the early 1980s caused permanent damage to both the UK's trade performance and industrial base; and that the UK's relative investment performance, via its hypothesised impact on product quality, helps to explain the subsequent improvement in UK trade performance since the mid‐1980s.     

A Measure of the Incidence of the Costs of Structural Change: The Experience of Birth place Groups in the Australian Labour Force during the Seventies*

During the 1970s there were some marked shifts in the occupational composition of the Australian workforce. It is sometimes argued that these had a particularly adverse effect on migrants. However we conclude that the structural pressures of the early 70s had only a minor impact on the relative labour market performances of different birthplace groups in Australia. The analysis involves the construction of a measure of the incidence of the costs of structural change. The correlation between the measure applied to birthplace groups and various indicators of their labour market performances is found to be low.