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The excess burden associated to characteristics of the goods: Application to housing demand

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  • Amelia Bilbao
  • Celia Bilbao
  • José M. Labeaga

Abstract

This paper shows that conditional subsidies aimed at certain kinds of goods do not merely generate the traditional excess burden: there is an alternative welfare loss as the distortion affects good characteristics rather than prices. We provide empirical evidence of the welfare loss after estimating a linear hedonic price model and using predicted prices in a quadratic almost ideal demand system for housing characteristics. We identify the sources of the losses and we also provide a monetary measure that suggests that, under plausible parameter values, it can be quantitatively high.

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  • Amelia Bilbao & Celia Bilbao & José M. Labeaga, "undated". "The excess burden associated to characteristics of the goods: Application to housing demand," Working Papers 2005-09, FEDEA.
    • Handle: RePEc:fda:fdaddt:2005-09
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    Cited by:

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    4. Pedro N. Rodríguez, & Simón Sosvilla-Rivero, 2006. "Understanding and Forecasting Stock Price Changes," Working Papers 2006-03, FEDEA.
    5. Namkee Ahn, "undated". "Life Satisfaction among Spanish Workers: Importance of Intangible Job Characteristics," Working Papers 2005-17, FEDEA.
    6. Andrés J. Marchante Mera & Bienvenido Ortega Aguaza & José Sánchez Maldonado, 2006. "Las dimensiones del bienestar en las Comunidades Autónomas Españolas. Un análisis de Sigma y Gamma-Convergencia," Working Papers 2006-05, FEDEA.

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