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Abstract

We examine the link between exogenous changes in the risk of job loss and the timing of different forms of the demand for housing. We exploit large differences in firing costs across contract types in the Spanish labour market due to regional incentives to firms for the promotion of open-ended contracts. Using data from the 2002-2014 waves of the Spanish Survey of Household Finances, we document that an increase of 1% in the stock of permanent contracts increases the probability of household formation by a similar magnitude (especially through rental).