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Owning a Dwelling or Having a Job? An Analysis of Homeownership and the Oswald Conjecture for Russia

Student: Pavel Kim

Supervisor: Konstantin Kholodilin

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Economics (Bachelor)

Final Grade: 10

Year of Graduation: 2018

After 70 years of the Communist rule that condemned the private homeownership, the mass privatization carried out in the early 1990s - early 2000s led virtually overnight to the emergence of a broad class of homeowners in Russia. The homeownership rate in Russia surged from the meager 26.4% in 1990 to a grand 87.1% by 2015. An additional impulse to this process was given by the introduction of the mortgage market in the early 2000s. But the increase in homeownership has its significant downsides, one of which is the decreased labor mobility because of increased moving costs for owners, which leads to increases in unemployment. This relationship is known as the Oswald conjecture, which was first proposed and tested by Andrew Oswald in 1996, and the test of its validity in case of Russia is the main goal of this paper. We test the conjecture using region-level panel data, consisting of 78 regions for years 2003-2016. Our estimation strategy considers the usage of standard panel approaches, augmented by the addition of spatially distributed lag and the usage of instrumental variables, as we assume homeownership rate to be endogenous in unemployment rate models. Our findings support the validity of the hypothesis for region's own homeownership rates, especially for lags of higher order, suggesting that homeownership produces long-term externalities affecting the labor market, while finding no significant proof that neighbouring regions' homeownership affects the unemployment rate of the region in question.

Full text (added May 17, 2018)

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