| Abstract: |
Using a national panel of housing units, this paper documents that the rate of
nominal rigidity in housing rents is high in Turkey between 2008 and 2011. We
find that, on average, 31.5 percent of the rents did not change from year to
year in nominal terms. We then ask if the incidence of nominal rigidity
depends on the turnover status of the housing unit. We show that 35.4 percent
of the nonturnover units had rigid rents, while for only 17.1 percent of the
turnover units rents did not change. We also present evidence that grid
pricing is associated with more than half of the nominal rigidity in housing
rents in our sample. The household- and individual-level determinants of the
nominal rigidity in rents and turnover status are also investigated using the
micro-level details available in our dataset. We document that, relative to
the low-income tenants, high-income tenants are less likely to have rigid
rents and they are also less likely to change units frequently. This finding
suggests that search and moving costs impose frictions that amplify the
opportunity costs of high-income tenants; thus, they are more likely to agree
on reasonable rent increases for the purpose of saving time and reducing
emotional stress. |