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Housing policy in developing countries. The importance of the informal economy

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  • Richard Arnott

    () (Department of Economics, University of California Riverside)

Abstract

All countries have a formal economy and an informal economy. But, on average, in developing countries the relative size of the informal sector is considerably larger than in developed countries. This paper argues that this has important implications for housing policy in developing countries. That most poor households derive their income from informal employment effectively precludes income-contingent transfers as a method of redistribution. Also, holding fixed real economic activity, the larger is the relative size of the informal sector, the lower is fiscal capacity, and the more distortionary is government provision of a given level of goods and services, which restricts the desirable scale and scope of government policy. For the same reasons, housing policies that have proven successful in developed countries may not be successful when employed in developing countries.

Suggested Citation

  • Richard Arnott, 2008. "Housing policy in developing countries. The importance of the informal economy," Working Papers 200801, University of California at Riverside, Department of Economics, revised Jan 2008.
  • Handle: RePEc:ucr:wpaper:200801
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    File URL: http://economics.ucr.edu/papers/papers08/08-01.pdf
    File Function: First version, 2008
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    References listed on IDEAS

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    1. Bosch, Mariano & Goni, Edwin & Maloney, William, 2007. "The determinants of rising informality in Brazil : Evidence from gross worker flows," Policy Research Working Paper Series 4375, The World Bank.
    2. Malpezzi, Stephen, 1999. "Economic analysis of housing markets in developing and transition economies," Handbook of Regional and Urban Economics,in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 44, pages 1791-1864 Elsevier.
    3. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
    4. Aureo de Paula & Jose A. Scheinkman, 2006. "The Informal Sector," Levine's Bibliography 122247000000001030, UCLA Department of Economics.
    5. Roger Gordon & Wei Li, 2007. "Puzzling Tax Structures in Devloping Countries: A Comparison of Two Alternative Explanations," NBER Chapters,in: Fiscal Policy and Management in East Asia, NBER-EASE, Volume 16, pages 9-35 National Bureau of Economic Research, Inc.
    6. Diamond, P. A., 1975. "A many-person Ramsey tax rule," Journal of Public Economics, Elsevier, vol. 4(4), pages 335-342, November.
    7. Pinto, Santiago M., 2004. "Assistance to poor households when income is not observed: targeted in-kind and in-cash transfers," Journal of Urban Economics, Elsevier, vol. 56(3), pages 536-553, November.
    8. W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," Review of Economic Studies, Oxford University Press, vol. 21(1), pages 21-30.
    9. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-277, October.
    10. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
    11. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters,in: Means-Tested Transfer Programs in the United States, pages 365-442 National Bureau of Economic Research, Inc.
    12. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
    13. Robert M. Buckley & Jerry Kalarickal, 2005. "Housing Policy in Developing Countries: Conjectures and Refutations," World Bank Research Observer, World Bank Group, vol. 20(2), pages 233-257.
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    Cited by:

    1. Hasan, Zubair, 2010. ""Islamic house financing:current models and a proposal from social perspective," MPRA Paper 31638, University Library of Munich, Germany, revised 02 Apr 2011.
    2. Jose Rosero, 2012. "The ABC of Housing Strategies: Are Housing Assistance Programs Effective in Enhancing Children's Well Being?," Tinbergen Institute Discussion Papers 12-074/3, Tinbergen Institute.
    3. Doaa Abouelmagd & Christian Kesteloot & Eric Corijn, 2013. "Housing Projects for Low-Income Groups and Modes of Economic Integration: A Comparative Study in Greater Cairo," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 104(4), pages 456-477, September.

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