2 - Evolution of the methodology
Published online by Cambridge University Press: 05 November 2011
Summary
Studies evaluating the tenant benefits of housing subsidy programs can be classified according to the benefit measure employed in the study. The benefit to participating families has frequently been measured by the subsidy given. For rental housing programs, this subsidy is the difference between the market rent of the housing unit and the rent paid by the family. Prescott (1967), Smolensky (1968), Bish (1969), and Aaron (1972, p. 122) are examples of studies that use this measure. In general, this benefit measure is unsatisfactory because the participating family is not indifferent between all dwellings providing the same subsidy. Therefore, different dwellings providing the same subsidy should not have the same measured benefit.
A second measure that has been used for evaluating housing programs is Marshall's consumer surplus measure. See, for example, Olsen and Prescott (1969), Olsen (1972), and Mayo (1980). With this method, benefit is defined as the change in consumer's surplus, as measured along a Marshallian demand curve, which results from changes in housing prices and consumption due to participation in a housing program. A major drawback of this measure is that it has no natural interpretation except under the restrictive assumption of zero income elasticity of demand for housing.
A third measure of tenant benefit is the Hicksian price equivalent variation. With this measure, tenant benefit is defined as the amount of additional income the participating family requires in order to be as well off without the housing subsidy program as participating in it. Unlike the other two measures, this measure corresponds to a conceptually useful definition of benefit.
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- The Benefits of Subsidized Housing ProgramsAn Intertemporal Approach, pp. 12 - 22Publisher: Cambridge University PressPrint publication year: 1987