1,792,538 research outputs found
The economic and law of rent control
Full text linkThe authors construct a model of second-generation rent control, describing a regime that does not permit rent increases for sitting tenants--or their eviction. When an apartment becomes vacant, however, the landlord is free to negotiate a new contract with a higher rent. They argue that this stylized system is a good (though polar) approximation of rent control regimes that exist in many cities in India, the United States, and elsewhere. Under such a regime, if inflation exists, landlords prefer to rent to tenants who plan to stay only a short time. The authors assume that there are different types of tenants (where"type"refers to the amount of time tenants stay in an apartment) and that landlords are unable to determine types before they rent to a tenant. Contracts contingent on departure date are forbidden, so a problem of adverse selection arises. Short stayers are harmed by rent control while long-term tenants benefit. In addition, the equilibrium is Pareto inefficient. The authors show that when tenant types are determined endogenously (when a tenant decides how long to stay in one place based on market signals) in the presence of rent control, there may be multiple equilibria, with one equilibrium Pareto-dominated by another. In other words, many lifestyle choices are made based on conditions in the rental housing market. One thing rent control may do is decrease the mobility of the labor force, because tenants may choose to remain in a city where they occupy rent-controlled apartments rather than accept a higher-paying job in another city. The authors show that abolishing the rent control regime can do two things: shift the equilibrium to a better outcome and result in lower rents, across the board.International Terrorism&Counterterrorism,Economic Theory&Research,Health Economics&Finance,Housing&Human Habitats,Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Banks&Banking Reform,Economic Theory&Research,Health Economics&Finance,Housing&Human Habitats
Rent - seeking trade policy : a time series approach
Full text linkUsing a time-series approach, the author analyzes the relationship between the extent of rent-seeking trade policy and both political and economic variables. For rent-seeking trade policy, the indicator he uses is the number of foreign-trade regulations passed each year for the benefit of a single firm or industry. The author uses data from Uruguay for 1925-83. Uruguay, which experienced an impressive economic decline, is an outstanding example of a rent-seeking society. After being a wealthy economy in midcentury, it suffered almost complete stagnation, which led to social and policital disintegration by the end of the 1960s. Three decades of restrictive regulations on foreign trade had created a nearly closed economy by the end of the 1960s. It was worth analyzing whether policymakers'great receptiveness to demands for protection could account for Uruguay's decline. Over the period 1925-83, the author finds almost 4,000 laws, decrees, and administrative resolutions that create, maintain, or modify a foreign-trade regulation for the benefit of a single firm or industry. About half of them explicitly identify the petitioner - usually a firm or guild. Since the size of the Uruguayan economy changed over the period studied, the author scales the annual number of regulations by output or exports to measure the extent of rent-seeking trade policy. The author shows that the extent of rent-seeking trade policy increased with discretionary policies and under dictatorship. (In the period studied, there were two stages of democracy - until 1932 and from 1943-72 - and two stages of dictatorship.) He also shows that rent-seeking trade restrictions increased under import-substitution strategies and, more unexpectedly, under active export promotion. This suggests that discretionary power leads to wasteful distribution, whether it is used to support inward- or outward-oriented policies. Finally, the author analyzes the correlation between innovations in the trade policy indicator and innovations in the growth rates of output and exports, with a lag of up to 20 years. Surprisingly, he finds a positive correlation with output growth rates after two or three years. But the correlation becomes negative some years later, particularly in the case of exports. The short-run positive impact on growth rates, together with the surprisingly long time lag before the negative impact, may account for policymakers'receptiveness to demands for protection.Trade Policy,Achieving Shared Growth,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Economic Theory&Research,Environmental Economics&Policies
Rent Seeking
Full text linkThis paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost to rent seeking, only wealthy agents choose to engage in it, as it allows them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers, and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking and production are possible. Copyright 2006, International Monetary Fund
When does rent-seeking augment the benefits of price and trade reform on rationed commodities? : estimates for automobiles and color televisions in Poland
Full text linkTo assess the impact of price and trade reform on the Polish market for autos and color televisions, the author has developed a differentiated product model in which consumers maximize utility and firms maximize profits subject to rationing constraints and price controls. This paper focuses on that model. First it discusses the institutional details of the auto and color TV markets in Poland. It then lays out the stylized facts that are incorporated in the model, and discusses the methods of allocating autos and color TVs in the context of the rent-seeking and rent dissipation literature. The final section summarizes the results which find that, all things being equal, the elimination of price controls for both autos and televisions had the effect of decreasing imports, as more domestic autos were produced and sold. The implication is that -- contrary to the Polish government's intention -- price controls were a trade distortion that increased imports: that is, they implicitly subsidized imports. The author also shows that import liberalization produces greater benefits when there are domestic price controls with rent dissipation, because import liberalization reduces the rent. The appendices include a description of the model, a discussion of the data sources, and a review of the literature on rent-seeking activities as it relates to rent dissipation under price controls.Economic Theory&Research,Markets and Market Access,Access to Markets,Environmental Economics&Policies,Fiscal&Monetary Policy
Foreign aid and rent-seeking
Full text linkTo address the relationship between concessional assistance, corruption, and other types of rent-seeking activities, the author provides a simple game-theoretic rent-seeking model. Insights with interesting implications emerge from the analysis: 1) An increase in government revenue (from windfalls, for example, or from increased foreign aid) does not necessarily lead to the provision of more public goods and in certain circumstances may reduce it. 2) The mere expectation of aid may suffice to increase rent-dissipation and reduce productive public spending. But if the donor community can enter into a binding policy commitment, this result may be reversed. The author provides some preliminary empirical evidence in support of the hypothesis that windfalls and foreign aid, in countries suffering from a divided policy process, are on average associated with more extensive corruption. He finds no evidence that donors systematically allocate aid to countries with less corruption. The results accords with recent empirical findings that aid is more effective, the greater the effort to direct it to good performers. But such a regime shift may involve an aid policy that in the short run provides more assistance to countries in less need and less aid to those in most need. Enforcing such a regime shift might be difficult.Environmental Economics&Policies,Development Economics&Aid Effectiveness,Decentralization,Gender and Development,Economic Theory&Research,Economic Theory&Research,Environmental Economics&Policies,Governance Indicators,Inequality,Development Economics&Aid Effectiveness
Rent control and misallocation
Full text linkThe paper considers welfare effects of rent control when it is applied only in a sector of a rental housing market. In rent controlled sectors of the Danish rental housing market, we find welfare reducing overallocation of square meters between 9 and 17 per cent of actual allocations. Looking at the 20 per cent most overallocated households, the overallocation of square meters is between 42 and 92 per cent, and the estimated corresponding welfare loss ranges from 1.5 to 5.3 per cent of the average annual rent in the sectors.Rent control; Housing; Regulation; Price ceiling; Rationing; Allocation
Wages, profits and rent-sharing
Full text linkThe paper suggests a new test for rent-sharing in the U.S. labor market. Using an unbalanced
panel from the manufacturing sector, it shows that a rise in a sector's profitability leads after some
years to an increase in the long-run level of wages in that sector. The paper controls for workers'
characteristics, for industry fixed-effects, and for unionism. Lester's range of wages is estimated,
for rent-sharing reasons alone, at approximately 24 per cent of the mean wage
Office Rent Determinants during Market Decline and Recovery
Full text linkThis article empirically examines office rent determinants in distinct periods of a market cycle. The study uses a dataset of office properties located in a large metropolitan area and spanning a six-year period. During this period, office rents experienced a significant decline and recovery. A time-varying parameter rent index identifies three distinct periods of the cycle: decline, trough and recovery. Tests of structural change conclude that market participants value the determinants of office rents differently during the periods. A microexamination of each rent determinant over the periods of the market cycle provides a greater understanding of how rents vary over time and the factors that influence them.
RENT: Notes on Efficiency Pricing, Rent Control and Monopolistic Landlords
Full text linkWe consider a model of 'tenancy rent control' where landlords are not allowed to raise the rent on sitting tenants nor to evict them, though they are free to set the nominal rent when taking on a new tenant. If there is any inflation in the economy, landlords prefer to take shortstaying tenants. Assuming that there is no way for landlords to tell a tenant's type, an adverse selection problem arises. If in this context, landlords have monopoly power--which, as we argue, is indeed pervasive--then the housing market equilibria can exhibit some unexpected properties. Most strikingly, landlords may prefer not to raise the rent even when there is excess demand for housing. Such rents are labeled "efficiency rents" in this paper and their existence shows that tenancy rent control can give rise to equilibria which look as it there were traditional rent control in which the rent of each unit has a flat ceiling. In other words, tenancy rent control may not achieve the flexibility, which it was expected to impart, to the system of traditional rent control.
TENANCY RENT CONTROL AND CREDIBLE COMMITMENT IN MAINTENANCE
Full text linkUnder tenancy rent control, rents are regulated within a tenancy but not between tenancies. This paper investigates the effects of tenancy rent control on housing quality and maintenance. Since the discounted revenue received over a fixed-duration tenancy depends only on the starting rent, intuitively the landlord has an incentive to spruce up the unit between tenancies in order to “show†it well, but little incentive to maintain the unit well during the tenancy. The paper formalizes this intuition, and presents numerical examples illustrating the efficiency loss from this effect.tenancy rent control, rent control, maintenance, housing quality, credible commitment
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