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Rent control, market segmentation, and misallocation: causal evidence from a large-scale policy intervention

Mense, Andreas, Michelsen, Claus and Kholodilin, Konstantin A. (2023) Rent control, market segmentation, and misallocation: causal evidence from a large-scale policy intervention. Journal of Urban Economics, 134. ISSN 0094-1190

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Identification Number: 10.1016/j.jue.2022.103513

Abstract

This paper studies market segmentation that arises from the introduction of rent control. When a part of the market remains unregulated, theory predicts an increase of free-market rents due to the misallocation of households to dwellings. To document this mechanism empirically, we study a large-scale policy intervention in the German housing market. We isolate the misallocation mechanism by exploiting temporal variation in treatment dates in an event study design. We find a robust positive spillover effect of rent control on free-market rents. Moreover, mobility of renters living in rent-controlled units decreased. [91 words]

Item Type: Article
Additional Information: © 2022 Elsevier Inc.
Divisions: Geography & Environment
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 04 Jan 2023 15:06
Last Modified: 22 Apr 2024 19:21
URI: http://eprints.lse.ac.uk/id/eprint/117699

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