Economic precariousness: A new channel in the housing market cycle

• Date: 01 April 2019
• Published date: 01 April 2019
• DOI: http://doi.org/10.1002/ijfe.1716

RESEARCH ARTICLE

Economic precariousness: A new channel in the housing

market cycle

Philip Arestis

1

| Ana Rosa Gonzalez‐Martinez

2

1

Department of Land Economy,

University of Cambridge, 19 Silver Street,

Cambridge CB3 9EP, United Kingdom

2

Wageningen Economic Research,

International Policy, Wageningen

University and Research, Netherlands

Correspondence

Ana Rosa Gonzalez‐Martinez,

Wageningen Economic Research,

International Policy, Wageningen

University and Research, Prinses

Beatrixlaan 582 ‐528, 2595 BM The

Hague, The Netherlands.

Email: ana.gonzalezmartinez@wur.nl

Abstract

Demographic and institutional elements, as important drivers of the housing

market, should not be neglected because it is not only financial and monetary

elements that matter in the case of the housing market. In this context, one

relationship, which still remains unclear, is the relationship between the

housing and the labour markets. Some research has been undertaken to sup-

port the hypothesis that high rates of homeownership lead to high unemploy-

ment via increases in the reservation wage. However, further research is

needed to address the possible implications of the institutional settings of

the labour market in the dynamics of the housing market. The aim of this

paper is to bring some light on the link between both markets. In particular,

this contribution explains how the housing cycle could be “amplified”via a

new channel, that is, economic precariousness, which is closely related to

job insecurity. Subsequently, we provide evidence in the case of five devel-

oped economies, Ireland, the Netherlands, Spain, the United Kingdom, and

the United States, over the period 1985–2013.

KEYWORDS

cointegration techniques, economic precariousness, house prices, job insecurity, labour markets

JEL CLASSIFICATION

C22; R31

1|INTRODUCTION

“Job insecurity is a condition wherein employees lack the

assurance that their jobs will remain stable from day to

day, week to week, or year to year. Depending on the dis-

cipline and political leanings of authors, job insecurity

can be referenced in a variety of ways. For instance,

‘boundaryless careers’,‘flexibility’,‘new employer‐

employee contracts’, and ‘organisational restructuring’

can sometimes be used as euphemisms for the disman-

tling of workplace protections for secure employment

(Pollert, 1988; Sweet, Moen, & Meiksins, 2007). But these

terms can also be used to highlight positive aspects of job

and organisational redesigns, some of which workers find

liberating (Heckscher, 1988; Piore & Sabel, 1984)”(Work

and Family Researchers Network, 2010).

1

Drawing attention to the “negative”side of this defini-

tion, economists might wonder whether there are “knock‐

on”effectsof job insecurity, which go beyondthe traditional

impacts on GDP and employment outcomes. Although

there aresome strands of the existingliterature, whichfocus

This piece of research was carried out before the author joined her cur-

rent organisation. Therefore, the thoughts and opinions expressed in the

text belong solely to the author, and not necessarily to the author's

organization.

Received: 3 January 2017 Revised: 31 January 2018 Accepted: 4 January 2019

DOI: 10.1002/ijfe.1716

1030 © 2019 John Wiley & Sons, Ltd. Int J Fin Econ. 2019;24:1030–1043.wileyonlinelibrary.com/journal/ijfe