Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention
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In: Journal of Urban Economics, Vol. 134, 103513, 03.2023.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention
AU - Mense, Andreas
AU - Michelsen, Claus
AU - Kholodilin, Konstantin A.
N1 - Publisher Copyright: © 2022 Elsevier Inc.
PY - 2023/3
Y1 - 2023/3
N2 - 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]
AB - 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]
KW - Economics
KW - Misallocation
KW - Price controls
KW - Rent control
KW - Spillovers
UR - http://www.scopus.com/inward/record.url?scp=85144306350&partnerID=8YFLogxK
U2 - 10.1016/j.jue.2022.103513
DO - 10.1016/j.jue.2022.103513
M3 - Journal articles
VL - 134
JO - Journal of Urban Economics
JF - Journal of Urban Economics
SN - 0094-1190
M1 - 103513
ER -