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Long-Run Labor Costs of Housing Booms and Busts

Published online by Cambridge University Press:  18 September 2023

Taylor Begley ,
Peter Haslag Open the ORCID record for Peter Haslag [Opens in a new window]  and
Daniel Weagley
Taylor Begley
Affiliation:
University of Kentucky Gatton College of Business & Economics [email protected]
Peter Haslag*
Affiliation:
Vanderbilt University Owen Graduate School of Management
Daniel Weagley
Affiliation:
Georgia Institute of Technology Scheller College of Business [email protected]
*
[email protected] (corresponding author)
Rights & Permissions [Opens in a new window]

Abstract

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We show large flows of workers into the real estate agent (REA) occupation during the early 2000s from virtually all parts of the skill, wage, and education spectrums. We find those entering REA in Metropolitan Statistical Areas (MSAs) with house price bubbles end up in occupations paying significantly less in the long-run as compared to similar REA entrants in non-bubble areas. Even in 2017, when house prices and employment return to their pre-crisis levels, REA entrants in Bubble MSAs are in occupations earning about 6% less. These results point to lasting effects of labor allocation decisions in response to distorted price signals.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 29
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank an anonymous referee and Jarrad Harford (editor) for constructive comments in the review process. We are grateful to Ilona Babenko, Itzhak Ben-David, Asaf Bernstein, Anthony DeFusco, Jason Donaldson, Paul Goldsmith-Pinkham, Todd Gormley, Isaac Hacamo, Camille Hebert, Matthew Notowidigdo, Joe Tracy, and conference and seminar participants at the 2019 Atlanta Federal Reserve Real Estate Conference, University of Colorado-Boulder, Emory University, the 2020 European Finance Association Annual Meeting, 2020 Finance Down Under Conference, Georgia Tech, 2020 RCFS/RAPS Winter Finance Conference, the 2020 Stockholm Labor and Finance Group Conference, Vanderbilt University, and Washington University in St. Louis for helpful comments on the article. Previous versions of this article were titled “Dream Chasers: The Draw and the Downside of Following House Price Signals” and “Dream Chasers: House Price Booms and the Misallocation of Human Capital.” Any remaining errors are our own.

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