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Housing policy in developing countries. The importance of the informal economy

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Author Info
Richard Arnott () (Department of Economics, University of California Riverside)

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Abstract

All countries have a formal economy and an informal economy. But, on average, in developing countries the relative size of the informal sector is considerably larger than in developed countries. This paper argues that this has important implications for housing policy in developing countries. That most poor households derive their income from informal employment effectively precludes income-contingent transfers as a method of redistribution. Also, holding fixed real economic activity, the larger is the relative size of the informal sector, the lower is fiscal capacity, and the more distortionary is government provision of a given level of goods and services, which restricts the desirable scale and scope of government policy. For the same reasons, housing policies that have proven successful in developed countries may not be successful when employed in developing countries.

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File URL: http://economics.ucr.edu/papers/papers08/08-01.pdf
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File Function: First version, 2008
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Paper provided by University of California at Riverside, Department of Economics in its series Working Papers with number 200801.

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Length: 45 pages
Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:ucr:wpaper:200801

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  1. Roger Gordon & Wei Li, 2005. "Puzzling Tax Structures in Developing Countries: A Comparison of Two Alternative Explanations," NBER Working Papers 11661, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics. [Downloadable!]
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  3. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law & Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
  4. Malpezzi, Stephen, 1999. "Economic analysis of housing markets in developing and transition economies," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 44, pages 1791-1864 Elsevier. [Downloadable!] (restricted)
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  5. P. A. Diamond, 1975. "A Many-Person Ramsey Tax Rule," Working papers 146, Massachusetts Institute of Technology (MIT), Department of Economics.
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  6. Aureo de Paula & Jose A. Scheinkman, 2007. "The Informal Sector," PIER Working Paper Archive 07-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
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  7. Robert M. Buckley & Jerry Kalarickal, 2005. "Housing Policy in Developing Countries: Conjectures and Refutations," World Bank Research Observer, Oxford University Press, vol. 20(2), pages 233-257.
  8. Aureo de Paula & Jose A Sheinkman, 2007. "The Informal Sector," Levine's Bibliography 122247000000001663, UCLA Department of Economics. [Downloadable!]
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