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]
CITATION STYLE
Mense, A., Michelsen, C., & Kholodilin, K. A. (2023). Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention. Journal of Urban Economics, 134. https://doi.org/10.1016/j.jue.2022.103513
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