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Public Housing and Unemployment in Postindustrial Hong Kong

Paavo Monkkonen

September 2014, English

The impact of living in public rental housing on employment has been the subject of substantial debate internationally. Restrictions on residential mobility, neighborhood effects, and the place-based housing subsidy itself are theorized to contribute to unemployment. However, recent evidence from Europe show that when the endogeneity of housing tenure and employment is modeled properly, the effect of living in public housing on employment is not significant. This paper examines the employment impacts of Hong Kong’s public rental housing system, one of the largest in the world. Hypothesis tests using simultaneous probit models show that unlike Europe, being a public housing tenant does increase the probability of unemployment. Access to employment also significantly impacts employment outcomes of public housing tenants, illustrating a major challenge of a maintaining a successful supply-side housing subsidy system when a city’s economic geography changes.