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Rent‐Imputation for Welfare Measurement: A Review of Methodologies and Empirical Findings
Author(s) -
Balcázar Carlos Felipe,
Ceriani Lidia,
Olivieri Sergio,
Ranzani Marco
Publication year - 2017
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12312
Subject(s) - economic rent , imputation (statistics) , welfare , economics , public economics , aggregate data , estimation , aggregate (composite) , econometrics , value (mathematics) , microeconomics , missing data , computer science , statistics , market economy , materials science , mathematics , management , machine learning , composite material
Housing should always be included in the construction of the welfare aggregate for welfare analysis. However, assigning a value to the flow of services from dwellings is problematic. Many households own the dwelling in which they live, making this value unobserved; others receive free housing or face prices lower than those at the market. Over the last decades, several estimation techniques have been proposed and implemented by practitioners to overcome this issue. This paper provides a review of methods commonly used to impute rent and discusses the relative advantages and disadvantages of each. We find no consensus on which imputation method is the most appropriate for welfare analysis, as well as a lack of evidence regarding the distributional impact of including rents in the welfare aggregate, particularly in developing countries. Moreover, practices for imputing rents vary across countries, calling for the future development of a unified framework.