confirm the decrease in elderly poverty when considering rent in 29 countries included in the EU Survey of Income and Living Conditions from 2007 to 2010 (see also Marquier, 2003 for France).

In developing countries, Guenardand S. Mesple-Somps (2010) show an increase of 9 and 3 percentage points in Madagascar and Côte d’Ivoire respectively headcount indices. This growth results as a consequence of not including imputed rent in the consumption aggregate.

# **5 Concluding Remarks**

This paper provides an extensive description of the different methodological approaches implemented to impute rent over the last decades. In particular, we focus on methods applied for welfare measurement. The literature is inconclusive about the most appropriate method to be used to impute rent for owners (and nonmarket tenants). Each method presents advantages as well as disadvantages also depending on the type of data available.

Within the hedonic price modeling framework, the parametric semi-logarithmic model has several advantages that make it a very common approach in the empirical literature. However, the lack of a specific functional form to be preferred over others and the risk of misspecification has generated a stream of applications using semi-parametric and non-parametric models. Yet, results are not unanimous when testing the superiority of semi-parametric and non-parametric approaches with respect to parametric ones. Additionally, when choices of tenure type and characteristics of the dwelling are not independent, OLS estimations might be inconsistent. Thus, correction for selection bias should be used. Implementing the stratification method involves creating a number of homogeneous cells defined in terms of various characteristics. Considering a large set of characteristics to define the strata increases the estimates precision, but also the magnitude of the standard error of imputed rents, as the number of observations per cell decreases with the number of strata.

The capital market approach faces similar difficulties as the hedonic model. The rent-to-value approach has two main problems highlighted in the literature: using the same capitalization ratio for tenants and owners within the same area might be misleading when dwellings’ characteristics differ significantly between these two population groups; and the second problem arises when underlined differences in the quality of the dwellings for owners and tenants are omitted in the estimation. The user-cost method entails complications like making reasonable assumptions on the proper interest rate, depreciation rate, inflation rate, as well as having precise information on the purchase prices of the dwellings.

The self-assessment relies on the expectation that owners _can_ estimate rental equivalences even when there is no comparable rental dwelling in the area in case they know of rents in other areas. This is supposedly less problematic in regions where the rental market is active and well developed. However, owner-occupiers may over-estimate the true rental value of their dwelling compared to rented homes with similar characteristics given the affinity to their property or neighborhood and should be treated with caution. Some studies calculate the magnitude and sign of this bias but there is not enough analysis or advice on how to solve or deal with this estimation problem.

Using data from external sources may contribute to solve the imputation problem when data are comprehensive enough about dwellings’ characteristics like in the case of administrative registers. However, several drawbacks arise when using this type of data such as the huge efforts necessary to gather such data for a whole country, outdated dwellings values reported in cadasters, and registers of exchanged houses that may not be representative of the total stock.

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