The choice of the appropriate matching variables should be dictated by economic theory and eventually adjusted based on information available in the data. Rosenbaum and Rubin (1983) argue that only variables measured before the treatment should be included to avoid any endogeneity with respect to the exposure to the treatment. Lechner (2008) shows that this condition can be relaxed as long as the effect of the treatment on the covariates is nonsystematic; variables observed after the treatment thus only induce a measurement error in . In the empirical application in the study, the choice of the appropriate variables is guided by the hedonic theory of consumption (Freeman 2003; Lancaster 1966), which shows how housing can be thought of as a XX commodity composite of different characteristics, and by consolidated empirical evidence. (See Hill 2013 for a survey of hedonic models for housing prices.) This includes location of the dwelling; structural attributes of the dwelling, such as whether it is a detached home or an apartment, type of construction, age of the dwelling, dimensions and number of rooms, and so on; and neighborhood characteristics, such as the quality of schools, accessibility of public transport, proximity of streets, crime rate, poverty rate, traffic congestion, and so on.

# **5. Data**

The study relies on data from the 15 rounds of the National Household Survey on Living Conditions and Poverty (Encuesta Nacional de Hogares sobre Condiciones de Vida y Pobreza) over 2003–17. This long time span includes the period of the rapid expansion of the housing market and the implementation of the progressive housing policies of the second half of the 2000s. Over the period, the survey was collected using the same methodology, including the questionnaire and sampling design, though there was an update of the sampling frame following the 2007 population census.

The National Household Survey is a continuous survey that collects detailed information on demographics, education, health, labor market status, farm and nonfarm income, participation in social programs, and perceptions of governance, democracy, and transparency.<sup>4</sup> The survey is the official source of information on monthly indicators on trends in poverty, inequality, and living conditions among households. It is representative across the 25 regions, plus Lima Province, which is separate from the Lima Region. Within each region, the survey is representative across urban and rural areas. The survey sampled between 21,919 households, in 2003, and 36,996 households, in 2017.

The first section of the questionnaire collects information on the dwelling characteristics of households, including type of dwelling, building materials, number of rooms, ownership status, renovations recently undertaken and the associated means of financing, and utilities and other facilities serving the dwelling as well as the cost of these. The ownership status distinguishes the following six categories: (1) tenants, (2) outright owners, (3) owners by squatting, (4) owners paying mortgage, (5) individuals living for free in an accommodation provided by an employer, and (6) accommodation provided by any other individual or entity.<sup>5</sup> Tenants report the monthly rent paid, while all other individuals are asked how much they could make if they were to rent the dwelling they live in.

> 4 The National Institute of Statistics and Informatics, the national statistics office, conducted a first survey of living standards in 1985 with the support of the World Bank. Subsequently, it undertook a permanent annual national survey on living conditions and poverty in 1995. In 1997, the methodology was improved with the support of the Inter-American Development Bank, the United Nations Economic Commission for Latin America and the Caribbean, and the World Bank. Starting in 2004, the methodology has been updated, including a change in expansion factors following the 2007 population census.

> 5 Since the beginning of the urbanization process in Peru, in the mid-1950s, the predominant method used by rural migrants to acquire housing has been squatting on peripheral land. For instance, see Fernández-Maldonado (2010); Gwinner (2007).

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