Travail et économie publique externe

Du 19/12/2024 de 12:30 à 13:30

PSE- 48 boulevard Jourdan, 74014 Paris, salle R1-09

KOSTER Hans (VU)

The inefficiency of tied subsidies: Evidence from the privatisation of UK public housing

Tied subsidies distort consumption choices and may be inefficient relative to untied subsidies. We estimate the consumption inefficiency of tied rental subsidies using a UK privatisation policy under which 3 million tenants have purchased their public-housing units at discounted rates rather than continue to access subsidised rents. Participating tenants accept purchase grants that are substantially smaller than the capitalised taxpayer cost of continuing to subsidise their rents. Our results suggest that by allowing public-housing households to re-optimise their housing consumption, the UK privatisation policy has generated efficiency savings worth at least 8-10% of the value of the public-housing stock.