IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp15300.html
   My bibliography  Save this paper

Real Estate Agent Earnings and Local Housing Prices

Author

Listed:
  • Hirsch, Barry

    (Georgia State University)

  • Macpherson, David A.

    (Trinity University)

  • Qu, Zichong (Tom)

Abstract

Real estate agents typically receive commissions based on a fixed percentage of home price purchases. Because housing prices vary across markets, one might expect that realtors have higher earnings in high-priced markets. Prior work by Hsieh and Moretti (2003) suggests that entry among realtors leads to roughly equivalent earnings across markets. We examine evidence from U.S. metro areas during 1996-2021 using Zillow housing price indices, coupled with realtor microdata (the CPS and ACS) including realtors' location, earnings, and work hours. Realtors' earnings elasticity with respect to local home prices is roughly 0.30, so that 10 percent higher home prices lead to 3 percent higher earnings. The positive wage-price relationship is not unique to realtors. The overall workforce has wage-price elasticities (conditioned on covariates) of about 0.20, two-thirds the size of realtors' elasticity. Realtors receive slightly higher earnings in higher-priced cities, about 1 percent for each 10 percent difference in housing prices. Weekly work hours across markets vary little with respect to metro housing prices, both for realtors and non-realtors. Evidence supports Hsieh and Moretti's conclusion that "over-entry" in high-priced markets is due to the inefficiency of fixed percentage commissions. Realtors have higher hourly earnings (and variance) than do "similar" non-realtor workers within the same labor markets, on the order of 10 percent. Evidence supports the view that real estate agents (on average) realize wage premiums. We suspect that higher earnings reflects both unmeasured personal attributes and compensating differentials for risk (e.g., variable earnings).

Suggested Citation

  • Hirsch, Barry & Macpherson, David A. & Qu, Zichong (Tom), 2022. "Real Estate Agent Earnings and Local Housing Prices," IZA Discussion Papers 15300, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15300
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp15300.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    2. Winters, John V., 2009. "Wages and prices: Are workers fully compensated for cost of living differences?," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 632-643, September.
    3. Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
    4. Katharine G. Abraham & John Haltiwanger & Kristin Sandusky & James R. Spletzer, 2013. "Exploring Differences in Employment between Household and Establishment Data," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 129-172.
    5. Chang-Tai Hsieh & Enrico Moretti, 2003. "Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1076-1122, October.
    6. Christopher R. Bollinger & Barry T. Hirsch, 2006. "Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 483-520, July.
    7. David Albouy, 2016. "What Are Cities Worth? Land Rents, Local Productivity, and the Total Value of Amenities," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 477-487, July.
    8. Barry T. Hirsch & Edward J. Schumacher, 2004. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 689-722, July.
    9. Christopher R. Bollinger & Barry T. Hirsch & Charles M. Hokayem & James P. Ziliak, 2019. "Trouble in the Tails? What We Know about Earnings Nonresponse 30 Years after Lillard, Smith, and Welch," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2143-2185.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David A. Macpherson & Barry T. Hirsch, 2023. "Five decades of CPS wages, methods, and union‐nonunion wage gaps at Unionstats.com," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 62(4), pages 439-452, October.
    2. Barry T. Hirsch, 2008. "Wage Gaps Large and Small," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 914-933, April.
    3. Meyer, Bruce D. & Mittag, Nikolas, 2021. "An empirical total survey error decomposition using data combination," Journal of Econometrics, Elsevier, vol. 224(2), pages 286-305.
    4. Hirsch, Barry, 2013. "An Anatomy of Public Sector Unions," IZA Discussion Papers 7313, Institute of Labor Economics (IZA).
    5. James P. Ziliak & Charles Hokayem & Christopher R. Bollinger, 2022. "Trends in Earnings Volatility Using Linked Administrative and Survey Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 41(1), pages 12-19, December.
    6. Macpherson, David A. & Hirsch, Barry, 2021. "Five Decades of Union Wages, Nonunion Wages, and Union Wage Gaps at Unionstats.com," IZA Discussion Papers 14398, Institute of Labor Economics (IZA).
    7. Barry T. Hirsch, 2008. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 153-176, Winter.
    8. Hirsch, Barry, 2006. "Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints," IZA Discussion Papers 2384, Institute of Labor Economics (IZA).
    9. Mark D. Partridge & Dan S. Rickman & M. Rose Olfert & Ying Tan, 2015. "When Spatial Equilibrium Fails: Is Place-Based Policy Second Best?," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1303-1325, August.
    10. Sevrin Waights, 2019. "The preservation of historic districts—is it worth it?," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 433-464.
    11. Rebecca Diamond, 2017. "Housing Supply Elasticity and Rent Extraction by State and Local Governments," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 74-111, February.
    12. Christopher R. Bollinger & Barry T. Hirsch, 2010. "GDP & Beyond – die europäische Perspektive," RatSWD Working Papers 165, German Data Forum (RatSWD).
    13. David A Keiser & Joseph S Shapiro, 2019. "Consequences of the Clean Water Act and the Demand for Water Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 349-396.
    14. Barry T. Hirsch & Edward J. Schumacher, 2012. "Underpaid or Overpaid? Wage Analysis for Nurses Using Job and Worker Attributes," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1096-1119, April.
    15. Dan S. Rickman, 2014. "Assessing Regional Quality of Life: A Call for Action in Regional Science," The Review of Regional Studies, Southern Regional Science Association, vol. 44(1), pages 1-12, Spring.
    16. Ashworth, Jared & Ransom, Tyler, 2019. "Has the college wage premium continued to rise? Evidence from multiple U.S. surveys," Economics of Education Review, Elsevier, vol. 69(C), pages 149-154.
    17. Thomas F. Crossley & Peter Levell & Stavros Poupakis, 2022. "Regression with an imputed dependent variable," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(7), pages 1277-1294, November.
    18. Hongbo Wang, 2016. "The Texas economic model, miracle or mirage? A spatial hedonic analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 56(2), pages 393-417, March.
    19. Jacqueline Agesa & Richard U. Agesa, 2012. "Imports, unionization and racial wage discrimination in the US," Applied Economics, Taylor & Francis Journals, vol. 44(3), pages 339-350, January.
    20. Winters, John V., 2022. "Minimum Wages and Restaurant Employment for Teens and Adults in Metropolitan and Non-metropolitan Areas," IZA Discussion Papers 15499, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    wages; housing prices; real estate agents; wage differentials;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp15300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.