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Rent Control and the Housing Expenditure Share

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Author Info

  • João Miguel Ejarque

    (DREAM, Amaliegade 44, 1256 København K)

  • Joachim Borg Kristensen

    (jbkr@nykredit.dk)

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    Abstract

    Using Danish register data we observe that households living in rental housing subject to rent regulations pay lower rents and have a lower expenditure share than households living in unregulated housing. We set up a model with rent control on a fraction of the housing stock, an explicit treatment of housing quality, and preferences including minimum housing and allowing for a non-constant share of housing in expenditure. The model broadly ?ts the data, and we ?nd evidence of signi?cant complementarity between housing and non durable consumption. Furthermore, the policy implications of our model are surprising in that a complete liberalization of the market achieves a modest welfare gain of under 1%.

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    File URL: http://www.econ.ku.dk/cam/wp0910/2013-01.pdf/
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    Bibliographic Info

    Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2013-01.

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    Length: 29 pages
    Date of creation: 18 May 2013
    Date of revision:
    Handle: RePEc:kud:kuieca:2013_01

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    Web page: http://www.econ.ku.dk/CAM/
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    Related research

    Keywords: Rent Control; Expenditure Shares; Preferences;

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    1. Martin Gervais & Jonas Fisher, 2008. "First Time Home Buyers and Residential Investment Volatility," 2008 Meeting Papers 148, Society for Economic Dynamics.
    2. Blair Jenkins, 2009. "Rent Control: Do Economists Agree?," Econ Journal Watch, Econ Journal Watch, vol. 6(1), pages 73-112, January.
    3. Bloze, Gintautas & Skak, Morten, 2009. "Rent control and misallocation," Discussion Papers of Business and Economics 7/2009, Department of Business and Economics, University of Southern Denmark.
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