Housing and Income Inequality in Europe. What drives the difference?

This article combines survey and national accounts data to estimate noncash income from imputed rents, using a consistent methodology for all countries in order to assemble comparable statistics that allow for a valid intercountry comparison. We can confirm a significant impact of non-cash income and find an inequality-decreasing effect for the unconditional income distribution which highly correlates with the proportion of owner-occupiers in the respective countries. However, aggregated inequality measures are not suited to analyse the increase of the conditional income inequality between owneroccupiers and renters, who do not obtain income from imputed rents by definition. Therefore we apply methods from the decomposition literature and find a strong heterogeneity of tenure structures, tax policies and the resulting distributional effects on the conditional income distribution.