Article ID Journal Published Year Pages File Type
970606 Journal of Urban Economics 2016 15 Pages PDF
Abstract

In the presence of price controls, nonmarket housing allocation mechanisms such as queueing prevent households from revealing their marginal willingness to pay for housing through market prices. We derive the households’ marginal willingness to pay using the intuitive idea that the length of the queue for a specific house reflects the households’ willingness to pay for housing characteristics. We apply our methodology to public housing in the Amsterdam Metropolitan area and show that, on average, the households’ marginal willingness to pay for a unit of public housing is close to its marginal costs. This suggests that the welfare loss of public housing through distortions in housing supply is rather limited and is mainly through distortions in housing demand. We provide indirect evidence of the latter by showing that queueing induces inefficient matching of households and housing.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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