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Why are regional unemployment differentials in Europe so persistent if, as the wage curve literature demonstrates, there is no compensation in labour markets? We hypothesize that workers in high-unemployment regions are compensated in housing markets. Modelling regional unemployment...
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Disequilibrium in the housing market can be detected by comparing the actual price-rent ratio with its equilibrium … presence of omitted variables. Applying this method to a data set consisting of 730,000 individual price and rent transactions … we find that quality adjusting significantly reduces the actual price-rent ratio. We then insert these quality adjusted …
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