Urban Employment Growth and the Housing Price-Productivity Gap: Evidence from 35 OECD Functional Urban Areas
DOI:
https://doi.org/10.25034/ijcua.2026.v10n2-8Keywords:
Urban employment growth, Housing prices, Labour productivity, Functional urban areas, Urban economic development, OECD citiesAbstract
Urban economic growth can enhance productivity and employment while intensifying pressure on housing markets, raising questions about whether housing-price appreciation remains proportionate to improvements in metropolitan economic performance. This study examines the relationships among employment, labour productivity, and house-price indices using an unbalanced panel of 600 city-year observations for 35 OECD functional urban areas in 11 countries between 2000 and 2023. A house-price-productivity gap is constructed from rebased house-price and labour-productivity indices to identify periods in which housing-price growth outpaces productivity growth. Two-way fixed-effects models, first-difference estimation, and sensitivity analyses examine within-city co-movement while accounting for persistent metropolitan characteristics and common temporal shocks. Annual house-price growth is positively associated with contemporaneous employment and productivity growth. In the levels specification, a 10% increase in employment is associated with 3.2% higher labour productivity and a 0.132-log-point increase in the house-price-productivity gap, equivalent to a 14.1% increase in the index ratio. The gap coefficient is an accounting implication of the productivity and house-price equations rather than an independent causal effect. Results remain positive across samples, denominators, and fixed-effects specifications, although their magnitudes vary substantially. The findings demonstrate that urban economic expansion and housing-market appreciation frequently move together but do not necessarily proceed at comparable rates. The price-productivity gap therefore provides a transparent diagnostic indicator of metropolitan divergence rather than a measure of housing affordability or welfare. Its application can identify urban areas where employment growth, productivity performance, and housing-market change warrant detailed investigation of housing supply, land-use conditions, household incomes, and distributional outcomes.
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