The decision on unconstitutionality of earmarking and its impact on the housing access: Evidence from Sao Paulo State, Brazil

In September of 1997 the Brazilian Supreme Court ruled unconstitutional the earmarking of tax revenues to public housing programme that was practised by the Government of the State of Sao Paulo. We explore this decision as an exogenous experiment to identify the impact of the earmarking prohibition on public housing deficit. We take advantage of the fact that the decision only affected the provision of public housing to households below a specific income threshold and estimate a difference-in-difference empirical model with probit estimators. Our results suggest that low-income individuals faced an average decrease of 4.5% in the probability of living in a housing deficit condition after earmarking was revoked.