Abstract
This study, using a multinomial logit sample selection model, estimates the determinants of tenure choice and demand for living space with a sample of 2,615 urban households in Korea. Housing tenure in Korea seems to be hierarchically structured by household income. Two-stage OLS estimation results of the living space demand equations suggest that the elasticities of both income and price are inelastic. However, the absolute magnitude of price elasticity is greater than that of income elasticity. This implies that the problem of insufficient living space of the lower income group will not be improved if the increasing rate of housing price is greater than that of income. The accessibility to formal mortgage markets is another important determinant of demand for living space. Thus enhancing accessibility to mortgage markets could be one of the policy devices to improve the problem of limited living space of renters effectively.
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