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The Misallocation of Housing Under Rent Control

Author

Listed:
  • Edward L. Glaeser
  • Erzo F. P. Luttmer

Abstract

The standard analysis of price controls assumes that goods are efficiently allocated, even when there are shortages. But if shortages mean that goods are randomly allocated across the consumers that want them, the welfare costs from misallocation may be greater than the undersupply costs. We develop a framework to empirically test for misallocation. The methodology compares consumption patterns for demographic subgroups in rent-controlled and free-market places. We find that in New York City, which is rent-controlled, an economically and statistically significant fraction of apartments appears to be misallocated across demographic subgroups. (JEL C25, D12, D61, R20)

Suggested Citation

  • Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    • Handle: RePEc:aea:aecrev:v:93:y:2003:i:4:p:1027-1046
    Note: DOI: 10.1257/000282803769206188
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    References listed on IDEAS

    as
    1. Deacon, Robert T & Sonstelie, Jon, 1989. "The Welfare Costs of Rationing by Waiting," Economic Inquiry, Western Economic Association International, vol. 27(2), pages 179-196, April.
    2. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
    3. Olsen, Edgar O, 1972. "An Econometric Analysis of Rent Control," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1081-1100, Nov.-Dec..
    4. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisted," Harvard Institute of Economic Research Working Papers 1747, Harvard - Institute of Economic Research.
    5. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
    6. Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    7. James Heckman & Jose Scheinkman, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 243-255.
    8. Mark Frankena, 1975. "Alternative Models of Rent Control," Urban Studies, Urban Studies Journal Limited, vol. 12(3), pages 303-308, October.
    9. Suen, Wing, 1989. "Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1384-1394, December.
    10. Cheung, Steven N S, 1974. "A Theory of Price Control," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 53-71, April.
    11. Gyourko, Joseph & Linneman, Peter, 1989. "Equity and efficiency aspects of rent control: An empirical study of New York City," Journal of Urban Economics, Elsevier, vol. 26(1), pages 54-74, July.
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    More about this item

    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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