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Rent control, mismatch costs and search efficiency

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  • Arnott, Richard
  • Igarashi, Masahiro

Abstract

In the discursive literature on rent control, it has been argued that rent controls cause the rental housing market to become "tighter" -- the vacancy rate falls, search costs rise, and tenants become less well-matched with housing units-but at the same time restrict landlords’ ability to exploit their market power in setting rents. Such phenomena are excluded by assumption in competitive models of the renting housing market. This paper applies a monopolistically competitive model of the rental housing market developed by Igarashi to explore these events. In the model, moderate rent controls are welfare-improving, but severe controls are harmful.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 30 (2000)
Issue (Month): 3 (May)
Pages: 249-288

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Handle: RePEc:eee:regeco:v:30:y:2000:i:3:p:249-288

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References

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  1. Anderson, S. P. & De Palma, A. & Nesterov, Y., . "Oligopolistic competition and the optimal provision of products," CORE Discussion Papers RP -1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
  3. Anas, Alex, 1997. "Rent Control with Matching Economies: A Model of European Housing Market Regulation," The Journal of Real Estate Finance and Economics, Springer, vol. 15(1), pages 111-37, July.
  4. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  6. Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
  7. John M. Quigley, 1976. "Housing Demand in the Short Run: An Analysis of Polytomous Choice," NBER Chapters, in: Explorations in Economic Research, Volume 3, number 1, pages 76-102 National Bureau of Economic Research, Inc.
  8. Sweeney, James L, 1974. "Quality, Commodity Hierarchies, and Housing Markets," Econometrica, Econometric Society, vol. 42(1), pages 147-67, January.
  9. Arnott, Richard, 1989. "Housing Vacancies, Thin Markets, and Idiosyncratic Tastes," The Journal of Real Estate Finance and Economics, Springer, vol. 2(1), pages 5-30, February.
  10. Sweeney, James L., 1974. "A commodity hierarchy model of the rental housing market," Journal of Urban Economics, Elsevier, vol. 1(3), pages 288-323, July.
  11. Arnott, Richard, 1987. "Economic theory and housing," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 24, pages 959-988 Elsevier.
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Cited by:
  1. Svarer, Michael & Rosholm, Michael & Munch, Jacob Roland, . "Rent Control and Unemployment Duration," Economics Working Papers 2003-11, School of Economics and Management, University of Aarhus.
  2. Raess, Pascal & von Ungern-Sternberg, Thomas, 2002. "A model of regulation in the rental housing market," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 475-500, July.
  3. Jakob Roland Munch & Michael Svarer, . "Rent Control and Tenancy Duration," Economics Working Papers 2001-7, School of Economics and Management, University of Aarhus.
  4. Laferrere, Anne & Le Blanc, David, 2004. "How do housing allowances affect rents? An empirical analysis of the French case," Journal of Housing Economics, Elsevier, vol. 13(1), pages 36-67, March.
  5. Zheng, Diehang & Deng, Yongheng & Gordon, Peter & Dale-Johnson, David, 2007. "An examination of the impact of rent control on mobile home prices in California," Journal of Housing Economics, Elsevier, vol. 16(2), pages 209-242, June.

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