Housing and Income Inequality in Europe: Distributional Effects of Non-Cash Income From Imputed Rents

Abstract

This article uses survey data to estimate non-cash income from imputed rents, using a consistent methodology for all countries to assemble comparable statistics that allow for a valid inter-country comparison. We can confirm a significant impact of non-cash income and find an inequality-decreasing effect for the unconditional income distribution which highly correlates with the proportion of owner-occupiers in the respective countries. However, aggregated inequality measures are not suited to analyze the increase in the conditional income inequality between owner-occupiers and renters, who do not obtain income from imputed rents by definition. Therefore, we apply a reweighting decomposition that controls for the heterogeneous housing characteristics among European countries and allows us to decompose the distributional changes into a part that is explained by the proportion of tenure types and household size and a remaining part that reflects the relative dispersion of imputed rents along the income distribution.