The Effect of Homeownership on the Option Value of Regional Migration

Abstract

This paper estimates a lifecycle model of consumption, housing choice and migration in the presence of aggregate and regional shocks, using the Survey of Income and Program Participation (SIPP). The model delivers structural estimates of moving costs by ownership status, age and family size that complement the previous literature. Using the model I first show that migration elasticities vary substantially between renters and owners, and I estimate the consumption value of having the option to migrate across regions when there are regional shocks. This value is 19% of lifetime consumption on average, and it varies substantially with household type. (This paper previously circulated as Regional Shocks, Migration and Homeownership)