I Congreso de Postgrado fcfm: ingeniería, ciencias e innovación

166 Santiago, 10 al 12 de agosto, 2022 ESTIMATING THE HOUSING INVESTMENT EXTERNALITIES EFFECTS OF A PUBLIC HOUSING PROGRAM IN CHILE Rafael Tiara Torres¹* ¹J-PAL (PUC), MAGCEA (U. Chile), Santiago, Chile. *Email: rafaelmirched@gmail.com ABSTRACT I study the housing investment externalities effects of the DS-49, a public housing program in RM, Chile. Using a quasi-experimental strategy, I exploit the time variation of the urban intervention to estimate the causal externalities effects as a function of distance. Reduced form estimation of the effects demonstrates that, in average, households that are closest to the housing projects invest more in housing quality and less in security that those furthest away. A back-of-the-envelope calculation for housing investment externalities indicate that these could represent an additional return on investment of up to 7%. A theoretical model based on both Rossi-Hansberg’s (2012) framework of housing externalities complementarity and the optimal housing consumption model proposed by Ortalo-Magné (2011) is suggested to explain the mechanisms beyond the behavioral change of the households. It rationalizes the idea that households that are closest to the housing projects invest more because they want to fill the housing quality gap, between their own residence and the perceived average quality of the neighborhood, created by the investment carried out by the government. I test this hypothesis by testing reduced form models on housing investment outcome variables measured by surveys to the households living in the intervened neighborhood in 2017 and 2018. Results suggest that, on average, for every 100 meters of proximity to the housing project, the probability of every household to invest in housing quality assets increases by 5%, while an extra investment of 12,000 CLP is performed. Implications are discussed when income heterogeneity is introduced into the model. Even though that richest households account for most of the housing investment in terms of amount invested, there are still persistent positive effects for low-income households. Finally, this study demonstrates the existence of anticipation and contemporaneous housing externalities effects. Households invest more with proximity even when the housing projects are still not ready. However, they tend to invest even more when the project has already been inaugurated and the new neighbors have arrived. In this sense, this study contributes to the literature by analyzing the externalities effects of public investment when social integration also plays a part. REFERENCES [1] Rossi-Hansberg, E. y Sarte, P.-D., “Economics of housing externalities,” International Encyclopedia of Housing and Home, vol. 2, p. 47–50, 2012. [2] Davis, M. y Ortalo-Magné, F., “Household expenditures, wages, rents,” Review of Economic Dynamics, vol. 14, p. 248–261, 2011 PO L Í T I CA S P Ú B L I CA S 15