The Effects of Housing Distortions on Unemployment

This paper attempts to measure the effects of U.K. government intervention in the housing market on mobility and unempl oyment. Incentives to move from areas of high to those of low unemployment are penalized by the interaction of social security, ren t subsidies, and other market distortions, such as union power. A regional unemployment model along these lines is specified and estimated for pooled U.K. data on eleven Standard Economic Regions fr om 1963 to 1979. The results assign a significant role to an index of housing distortion, unionization, rate poundage, and to regional demand composition. The total effect of housing distortion on unemployment is estimated tentatively at 1.8 percent.