A Model of the Housing Privatization Decision: The Case of Russia

Abstract

This study addresses the issue of housing privatization in Russia in the course of the 1990s. Privatization was started to create a housing market in order to efficiently allocate resources in the use and production of housing, and to phase out the state budget financing of housing. The dwellings were offered to their residents free of payment. The objective of this study is to offer a better understanding of the structural components of privatization by formally modeling housing privatization decision from the household point of view. The model is based on a trade-off between certain value of renting and uncertain value of owning. Using the results of the theoretical model, an empirical model of the privatization decision from the point of view of the household is formulated.