"A salient feature of the recent U.S. recession is that output and employment have declined more in regions (states, counties) where household leverage had increased more during the credit boom. This pattern is difficult to explain with standard models of financing frictions. We propose a theory...

Oswald hypothesizes that regions and countries with high homeownership rates will experience higher natural rates of unemployment and that rising homeownership in OECD countries since the 1960s provides a key explanation for the rise in the natural rate of unemployment over the same time period....