From 2006 until 2020, the probability of selling a house in the U.S. declined sharply after listing for 2 weeks. Moreover, sales within the first 2 weeks of listing ("quick sales") and sales happening afterward ("slow sales") behaved differently over the housing cycle. The probability and associated price of a quick sale recovered from the slump sooner, faster, and more prominently than a slow sale. This paper demonstrates that a calibrated stock-flow matching model not only generates quantitatively consistent sales, prices, listings, and time on the market but also captures distinctions between fast and slow sales over the housing cycle.

This paper considers equilibrium trade in a real estate market. When search is directed, buyers have private independent values, and sellers compete on asking prices, stock-flow matching characterises equilibrium outcomes. Consistent with the data, equilibrium not only generates large and variable price spikes for new listing sales; unsuccessful sellers lower their asking prices over time; and there is equilibrium asking price dispersion. Bidding war data demonstrate that the match surplus is substantial: a lower bound equals 3.3% of house price, whereas ballpark examples suggest match surplus is around 10%.

This paper assesses wage setting and wage dynamics in a search and matching framework where (i) workers and firms on occasion can meet multilaterally; (ii) workers can recall previous encounters with firms; and (iii) firms cannot commit to future wages and workers cannot commit to not searching in the future. The resulting progression of wages (from firms paying just enough to keep their workers) yields a compensation structure consistent with well established but difficult to reconcile observations on pay dynamics within jobs at firms. Along with wage tenure effects, serial correlation in wage changes and wage growth are negatively correlated with initial wages.

Download This Paper Open PDF in Browser Add Paper to My Library Share: Permalink Using these links will ensure access to this page indefinitely Copy URL The Short and the Long of it: Stock-Flow Matching in the US Housing Market CESifo Working Paper No. 10035 54 Pages Posted: 28 Oct 2022 See all articles by Eric SmithEric SmithUniversity of Essex - Department of EconomicsZoe XieWorld BankLei FangFederal Reserve Banks - Federal Reserve Bank of Atlanta Date Written: 2022 Abstract This paper investigates the US housing market from just before the Great Recession onward (2006-2019) and assesses the viability of stock-flow matching in generating the observed outcomes. The paper documents that the probability a house sells declines sharply after listing for two weeks. Moreover, the probability and associated price of a fast sale recover from the housing slump sooner, faster, and more prominently than slower sales. The simulated stock-flow matching model can not only mimic sales, prices, listings, and time-on-market but also capture the distinctions in quick and slower trades, indicating the importance of stock-flow matching for understanding housing market dynamics. Keywords: housing, stock-flow matching, trading dynamics, duration dependence JEL Classification: E300, R210, R310 Suggested Citation: Suggested Citation Smith, Eric and Xie, Zoe and Fang, Lei, The Short and the Long of it: Stock-Flow Matching in the US Housing Market (2022). CESifo Working Paper No. 10035, Available at SSRN: https://ssrn.com/abstract=4259632 Eric Smith (Contact Author) University of Essex - Department of Economics ( email ) Wivenhoe ParkColchester CO4 3SQUnited Kingdom Zoe Xie World Bank ( email ) 1818 H Street NWWashington, DC 20433United States HOME PAGE: http://https://zoexie.weebly.com/ Lei Fang Federal Reserve Banks - Federal Reserve Bank of Atlanta 1000 Peachtree Street N.E.Atlanta, GA 30309-4470United States Download This Paper Open PDF in Browser Do you have a job opening that you would like to promote on SSRN? Place Job Opening Paper statistics Downloads 1 Abstract Views 7 PlumX Metrics Related eJournals CESifo Working Paper Series Follow CESifo Working Paper Series Subscribe to this free journal for more curated articles on this topic FOLLOWERS 9,189 PAPERS 9,800 This Journal is curated by: Clemens Fuest at CESifo (Center for Economic Studies and Ifo Institute, University of Munich) Macroeconomics: Prices, Business Fluctuations, & Cycles eJournal Follow Macroeconomics: Prices, Business Fluctuations, & Cycles eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 1,545 PAPERS 15,479 Urban Economics & Regional Studies eJournal Follow Urban Economics & Regional Studies eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 738 PAPERS 22,739 Econometric Modeling: Macroeconomics eJournal Follow Econometric Modeling: Macroeconomics eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 663 PAPERS 16,070 Econometric Modeling: Microeconometric Studies of Health, Education, & Housing Markets eJournal Follow Econometric Modeling: Microeconometric Studies of Health, Education, & Housing Markets eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 616 PAPERS 6,830 Monetary Economics: International Financial Flows, Financial Crises, Regulation & Supervision eJournal Follow Monetary Economics: International Financial Flows, Financial Crises, Regulation & Supervision eJournal Subscribe to this fee journal for more curated articles on this topic FOLLOWERS 496 PAPERS 6,405 Feedback Feedback to SSRN Feedback (required) Email (required) Submit If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. Submit a Paper Section 508 Text Only Pages SSRN Quick Links SSRN Solutions Research Paper Series Conference Papers Partners in Publishing Jobs & Announcements Newsletter Sign Up SSRN Rankings Top Papers Top Authors Top Organizations About SSRN SSRN Objectives Network Directors Presidential Letter Announcements Contact us FAQs Copyright Terms and Conditions Privacy Policy We use cookies to help provide and enhance our service and tailor content. To learn more, visit Cookie Settings. This page was processed by aws-apollo-4dc in 0.188 seconds

This paper demonstrates the way in which stock-flow matching with endogenous seller entry generates hot and cold spells in house sales. Potential sellers know the number of bidders remaining from the last house sale. If two or more bidders remain, the seller obtains the gains to trade through competitive bidding. The market is active. With one monopolistic bidder, the buyer captures the surplus and sellers become unwilling to enter. The market remains inactive until sellers think enough time has passed for buyer entry to have replenished the market and make entry profitable. The resulting pattern of trade matches up with observations from Dane County, Wisconsin.

Stock-flow matching is a simple and elegant framework of dynamic trade in differentiated goods. Flows of entering traders match and exchange with the stocks of previously unsuccessful traders on the other side of the market. A buyer or seller who enters a market for a single, indivisible good such as a job or a home does not experience impediments to trade. All traders are fully informed about the available trading options; however, each of the available options in the stock on the other side of the market may or may not be suitable. If fortunate, this entering trader immediately finds a viable option in the stock of available opportunities and trade occurs straightaway. If unfortunate, none of the available opportunities suit the entrant. This buyer or seller now joins the stocks of unfulfilled traders who must wait for a new, suitable partner to enter. Three striking empirical regularities emerge from this microstructure. First, as the stock of buyers does not match with the stock of sellers, but with the flow of new sellers, the flow of new entrants becomes an important explanatory variable for aggregate trading rates. Second, the traders’ exit rates from the market are initially high, but if they fail to match quickly the exit rates become substantially slower. Third, these exit rates depend on different variables at different phases of an agent’s stay in the market. The probability that a new buyer will trade successfully depends only on the stock of sellers in the market. In contrast, the exit rate of an old buyer depends positively on the flow of new sellers, negatively on the stock of old buyers, and is independent of the stock of sellers. These three empirical relationships not only differ from those found in the familiar search literature but also conform to empirical evidence observed from unemployment outflows. Moreover, adopting the stock-flow approach enriches our understanding of output dynamics, employment flows, and aggregate economic performance. These trading mechanics generate endogenous price dispersion and price dynamics—prices depend on whether the buyer or the seller is the recent entrant, and on how many viable traders were waiting for the entrant, which varies over time. The stock-flow structure has provided insights about housing, temporary employment, and taxicab markets.

We construct a simple equilibrium search model in which workers accumulate information about previously met employment contacts. We term the latter search capital. Here search capital (partially) insures workers against adverse shocks. The model provides a theory of job-to-job transitions that are associated with voluntary or involuntary mobility and with wage rises or wage cuts. It also shows why low wage and younger workers are associated with a higher probability of becoming unemployed.

This paper assesses the trade-off between acquiring specialized skills targeted for a particular occupation and acquiring a package of skills that diversifies risk across occupations. Individual-level data on college credits across subjects and labor-market dynamics reveal that diversification generates higher income growth for individuals who switch occupations whereas specialization benefits those who stick with one type of job. A human capital portfolio choice problem featuring skills, abilities, and uncertain labor outcomes replicates this general pattern and generate a sizable amount of inequality. Policy experiments illustrate that forced specialization generates lower average income growth and lower turnover, but also lower inequality.

Stock–flow job matching implies that there are two types of job seekers—those on the short side of their occupations who can easily find work, and those on the long side who expect extended unemployment spells. Using matching data and information on completed and uncompleted unemployment spells for England and Wales, this paper uses the stock–flow matching hypothesis to identify the fraction (incidence) of laid off workers who find themselves on the long side of the market and, conditional on being on the long side, their expected unemployment duration. The average incidence is around one-half and increases significantly in recessions. The expected duration is also strongly countercyclical—peaking at 15 months in the 1990–1992 recession and falling to a more modest 9 months by January 1999. Cross-section estimates also identify a North–South divide and a large city effect—the unemployed in large cities and in the North experience longer spells.

Considerable evidence demonstrates that significant dispersion exists in the prices charged for seemingly homogeneous goods. This paper adopts a simple, flexible equilibrium model of search to investigate the way the market structure influences price dispersion. Using the noisy search approach, the paper demonstrates the effects of having a single large, price-leading firm with multiple outlets and a competitive fringe of small firms with one retail outlet each.

This paper demonstrates the way in which assignment frictions-the limited ability of workers to find jobs in which they have a comparative advantage-affect the level and composition of human capital acquisition as well as the distribution of income. As workers become more likely to find their preferred job, they specialize more. Specialization raises expected income. It also exposes workers to a greater downside loss when the more desired employment opportunities are unavailable. More specialization thereby raises the earnings divide between those who match well and those who do not, which under some conditions leads to greater inequality.

Housing, labor and other markets with trading frictions often appear to experience prolonged spells of high and low turnover. Although specifics vary across particular markets and over time, the general impression is that during very active periods, prices are high. Prices are low when turnover becomes slack, if trade occurs at all. This paper demonstrates the way in which such distinct hot and cold trading episodes can arise given a stock-flow matching process. Stock-flow matching (see Taylor, 1995; Coles and Smith, 1998; Coles and Muthoo, 1998; Coles, 1999; Gregg and Petrongolo, 2005; Lagos, 2000) assumes that buyers and sellers do not search randomly. Instead, market participants have a good idea about where to look for suitable partners. They check public and private intermediaries such as real estate or employment agencies, ads in newspapers and in websites, or ask friends and relatives. As in the directed search literature (e.g. Montgomery, 1991; Acemoglu and Shimer, 1999; Burdett et al, 2001), the stock-flow literature assumes the