rivista italiana di economia demografia e statistica - Sieds

Rivista Italiana di Economia Demografia e Statistica Volume LXIII nn. 3-4 – Luglio-Dicembre 2009
THE EFFECTS OF IMPUTED RENT ON INCOME, POVERTY
AND INEQUALITY IN FOUR EUROPEAN COUNTRIES
Andrea Cutillo, Davide Di Laurea •
1. Introduction
The income position of individuals and households is determined by monetary
earnings, but also influenced by non-monetary components and in-kind transfers. The
inclusion of non-monetary earnings is recommended in international standards in order
to improve the comparability of poverty and economic inequality of people living in
different situations. In this paper we focus on a particular type of non-cash income, the
imputed rent (IR). Following the European Commission Regulation n. 1980/2003, “the
imputed rent refers to the value that should be imputed to all the households that do not
pay full rent for their main residence, i.e. a market price rent, either because they are
owner-occupiers or they live in accommodation rented at lower price than the market
price, or because their accommodation is provided rent-free”. There is a large
agreement about the importance of integrating this component into income measures
(ILO, 2003; Canberra Group, 2001). We focus on the distributional impact of imputed
rent in four European Countries: France, Italy, Spain and United Kingdom. Even if the
attention on imputed rent has raised in the last years, little attention has been given to
the international comparison (see, for instance, Frick et al. (2008)); in addition there is
not yet a standardised calculation method, as suggested by the Canberra Group (2001)
and by Smeeding and Weinberg (2001): “if net imputed rent is included in income, one
must be careful that it is measured in a way that leads to greater international
standardization instead of nation-specific measures of its value”. We use Eu-Silc
(European Community Statistics on Income and Living Conditions) 2006 microdata:
this survey is harmonized across Countries, and this enables us to homogeneously
estimate imputed rent and compare the results.
2. Estimation methods
The IR must be included for all households that do not report paying full rent: those
living in owned dwellings and households living in accommodation rented at a lower
• This note, though is the result of a close collaboration, was specifically elaborated as
follows: par. 1, 2 and 4 by A. Cutillo; par. 3 and 5 by D. Di Laurea