Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortions on Housing Prices?

Carlos Medina and Leonardo Morales

Borradores de Economia from Banco de la Republica de Colombia

Abstract: Domiciliary public utility services in Colombia have a cross subsidy system which charges subsidized rates to the households who live in houses located in strata associated to low wealth levels, and taxed rates to the better off. We assesses the hypothesis that the flow of subsidies that potentially come from a particular house, are discounted by housing market agents so that most of them are transferred to the prices of the houses that generate the subsidies. By estimating a hedonic prices model applying a regression discontinuity approach, we find that the increment in house value estimated because of subsidies is similar in magnitude to the present value of the flow of subsidies. Likely effects are found on the rent amount. We conclude that subsidies to the poor population through public spending in domiciliary public utility services in Colombia is being achieved, if anything, in a very limited way. Most of the financial effort on this subject ends up distorting housing relative prices according to socioeconomic strata, with an annual cost of up to 0.7% of GDP in supposed gross subsidies to domiciliary public utility services.

Keywords: targeting of subsidies; Incidence; stratification; segregation; hedonic price models; regression discontinuity design. (search for similar items in EconPapers)
JEL-codes: C0 D31 H22 H24 H4 I3 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://doi.org/10.32468/be.422 (application/pdf)

Related works:
Journal Article: Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortion of Housing Prices? (2007)
Working Paper: Stratification and public utility services in Colombia: subsidies to households or distortion of housing prices? (2007)
Working Paper: Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortions on Housing Prices? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:422

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