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

  • Richard Arnott

    ()

    (Department of Economics, University of California Riverside)

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.

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File URL: http://economics.ucr.edu/papers/papers08/08-01.pdf
File Function: First version, 2008
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Paper provided by University of California at Riverside, Department of Economics in its series Working Papers with number 200801.

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Length: 45 pages
Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:ucr:wpaper:200801
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  1. 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.
  2. Jose Scheinkman & Aureo de Paula, 2007. "The Informal Sector," 2007 Meeting Papers 117, Society for Economic Dynamics.
  3. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
  4. Diamond, P. A., 1975. "A many-person Ramsey tax rule," Journal of Public Economics, Elsevier, vol. 4(4), pages 335-342, November.
  5. 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.
  6. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
  12. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
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