Housing, imputed rent, and household welfare

Housing is the most important durable good consumed by households. This paper assesses the distributional effects of including the value of the flow of dwelling’s services consumed by households with respect to the case where such value is excluded, testing different estimation methods in four developing countries. Including rental values leads to statistically significant and sizable changes in indicators of poverty and inequality that might also determine an international reranking of countries. This paper advances for the first time a step-by-step guide to the estimation of rental values, using information typically available in household surveys. As housing gains importance with the level of development of countries, accounting for rental values becomes significant in antipoverty programs, which need accurate information to minimize errors of inclusion and exclusion and the potential waste of scarce public resources.