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Procedural Formalism and Social Networks in the Housing Market

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  • Antoine Bonleu

Abstract

Why do some OECD countries have high levels of procedural formalism (PF) in the housing market? We provide an explanation based upon complementarities between the strength of social networks and the stringency of procedural formalism. The interest of social networks is that conflict resolution is independent from the law. When local agents belong to social networks whereas non-local agents do not, PF may facilitate housing search for locals at the expense of non-locals. To illustrate this mechanism we build a search-theoretic model of the housing market. The model emphasizes that the demand for PF occurs when the size of social networks is large. By simulations, we show that the support for PF increases with the size of social networks, the default probability on the rent and the proportion of non-local agents. JEL Codes: R38.

Suggested Citation

  • Antoine Bonleu, 2019. "Procedural Formalism and Social Networks in the Housing Market," Annals of Economics and Statistics, GENES, issue 133, pages 25-56.
  • Handle: RePEc:adr:anecst:y:2019:i:133:p:25-56
    DOI: 10.15609/annaeconstat2009.133.0025
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    2. Moreno Galbis, Eva & Wolff, Francois-Charles & Herault, Arnaud, 2020. "How helpful are social networks in finding a job along the economic cycle? Evidence from immigrants in France," Economic Modelling, Elsevier, vol. 91(C), pages 12-32.
    3. Pacillo, Grazia, 2016. "Market participation, innovation adoption and poverty in rural Ghana," Economics PhD Theses 0916, Department of Economics, University of Sussex Business School.
    4. Antoine Bonleu, 2017. "Sun, Regulation and Local Social Networks," AMSE Working Papers 1714, Aix-Marseille School of Economics, France.

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    More about this item

    JEL classification:

    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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