Measuring Risk on Investment in Informal (Illegal) Housing: Theory and Evidence from Pune, India

• Tác giả: Mudit Kapoor
• Ngôn ngữ: eng
• Ký hiệu phân loại: 307.33 *Patterns of use
• Thông tin xuất bản: 2012
• Bộ sưu tập: Tài liệu truy cập mở
• ID: 242839
• Chủ đề: 1. Formal and Informal Sectors; 2. Illegal Behavior and the Enforcement of Law K420; 3. Microeconomic Analyses of Economic Development O120; 4. Personal Finance D140; 5. Shadow Economy

Tóm tắt

In this paper, we analyze a household's decision to invest in informal (illegal) housing in developing countries. Using a simple model of housing supply, we show that the difference in the rates of return on housing investment in the formal and informal sectors reflects the additional risk associated with the latter. Using household survey data from Pune (a large city in India), we estimate this risk premium in the city to be approximately 22%, or 150 basis points. We use our approach to estimate the informal risk premium for cities in other countries based on results from previous studies.