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Lessons from the financial crisis: remarks at The Economic Club of New York, New York City
Remarks at The Economic Club of New York, New York City.
Geographical reallocation and unemployment during the Great Recession: the role of the housing bust
This paper quantitatively evaluates the hypothesis that the housing bust in 2007 decreased geographical reallocation and increased the dispersion and level of unemployment during the Great Recession. We construct an equilibrium model of multiple locations with frictional housing and labor markets. When house prices fall, the amount of home equity declines, making it harder for homeowners to afford the down payment on a new house after moving. Consequently, the decline in house prices reduces migration and causes unemployment to rise differently in different locations. The model accounts for ...