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Title: House Price and the Labor Force Composition of Cities: Testing Models using the Location of Hispanic Workers

Citation Type: Miscellaneous

Publication Year: 2014

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Abstract: Recent research has related variation in the labor force composition of cities to the cost of housing. First, workers with more human capital tend to locate in cities with high housing costs (income elasticity effect). Second, households with low demand for housing also select into expensive cities (housing preference effect). This paper applies both effects to the location patterns of Hispanic versus non-Hispanic white workers across U.S. cities. Skill intensity in the labor force of both groups is expected to increase with the cost of housing according to the income elasticity effect. However, a number of low skill Hispanics are not permanent, long-term residents of cities and hence have relatively low demand for housing. This suggests an inverse relation between Hispanic skill intensity and house price based on the housing preference effect. Empirical tests show that skill intensity varies positively with house price for non-Hispanic white workers as expected, and negatively for Hispanics (housing preference effect dominates income elasticity effect). The dominance of the housing preference effect means that the location patterns of Hispanic households by skill level are significantly different than those of non-Hispanic households. The results challenge models that assume homothetic or homogeneous preferences over housing, and show that the two effects together can explain the changing distribution of Hispanic households across U.S. cities.

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Authors: Broxterman, Daniel A

Publisher: The George Washington University

Data Collections: IPUMS USA

Topics: Housing and Segregation, Labor Force and Occupational Structure, Land Use/Urban Organization, Race and Ethnicity

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