rivista italiana di economia demografia e statistica - Sieds

58
Volume LXIII nn. 3-4 – Luglio-Dicembre 2009
The influence on rental prices by the duration of the contracts is a matter-of-fact effect.
Miron (1990) states that the time discount must be considered as a specific condition of
the dwelling which may modify the price of dwelling services received by the
household, and must be taken into account in imputing rents. Consequently, we include
the length of occupancy in the regression model to take tenure discount into explicit
account, to prevent an omitted variable problem. At the same time, we neutralize its
effect when imputing rents. While the tenure is a basic control factor in the regression,
it has to be excluded for predicting values as the opportunity cost is represented by the
current value of the alternative.
The estimated coefficients β in (4) are then multiplied by the values of the
explanatory variables observed for the household j belonging to the other sub-groups,
in order to obtain their corresponding value of IR. IR estimates for the owner-occupiers
(O) is calculated as:
y fig,j = exp (β 0 + β 1k X O kj + β 3 λ O j +σ 2 /2) (5)
where the term β 2 *T i disappears because T is settled to 0, in order to sterilize the effect
due to the length of occupancy on the final estimates; the last term is the smearing
estimator, where σ 2 is the estimated variance of the error term u: its inclusion prevents
form the retransformation bias (Duan, 1983).
The data used are from the Eu-Silc project; it is an instrument aiming at collecting
timely and comparable multidimensional micro data for indicators on income, social
cohesion and social exclusion. This instrument is anchored in the European Statistical
System.
4. Main results on overall income distribution and inequality indicators
Due to space restrictions, we do not present the results on the probit and OLS
models 2 . However, it is important to highlight that the selection bias seems to operate
in every Country and for every subgroup, except for free tenants in IT and ES,
supporting our decision to correct for such bias.
We can now measure the impact of introducing IR on income. In table 1 the
average disposable incomes in the four Countries are presented, including and not
including IR. Income is in the equivalent form, obtained through the OECD scale, at
Purchasing Power Parities (PPP). If we use the average income with no IR for each
Country as a baseline (column 3 of table 1) we notice increases with different
magnitudes across Countries (column 6 of table 1): the greatest increase is registered
for ES (+29,9%) and the smallest for IT (+19%), compared to around +23% for UK
and FR.
2 The results are available on request from the authors.