Comprehensive evaluation of wealth effects on local labor market outcomes

Wealth effect estimates between asset classes across studies often cannot be directly compared. To allow for this comparison I construct a new data set on U.S. household asset and debt positions at the county-level to obtain new estimates of wealth effects on local labor market outcomes. I find evidence of wealth effects from local house price, mortgage rate, and stock market wealth shocks, but no effects from the bond market return and deposit rate shocks. The negative employment and payroll effects from mortgage rate changes are large but arise mostly due to the fact that high income workers migrate out of the county following a relatively high interest rate increases. On the other hand, similar positive effects from changes in housing and stock market wealth are more modest but robust to alternative explanations. House price effects operate primarily via the construction sector while other effects via the non-tradable sector —findings that support the wealth effect interpretation. A model with heterogeneous agents and consumption wealth effects motivates the empirical analysis