The Effect of Public Expenditure on the Housing Deficit in Peru at the Municipal Level

ABSTRACT

What impact does public expenditure on housing have on the deficit in a municipality? This article answers this question for Peru for the period 2001–2013. Municipalities with high expenditure levels saw a reduction in the number of households lacking access to water, sanitation, and electricity. There was no significant change in cohabitation, overcrowding, or lack of documents of ownership. The analysis was based on the empirical association between mineral exploitation and housing deficit at the municipal level. Municipalities that benefited from the mineral boom after 2007 saw housing expenditures increase dramatically, which reduced the housing deficit associated with poor materials to 18% from 33% (the national average). In addition, the housing deficit related to lack of water, sanitation, and electricity decreased from 26% to 22%.

KEYWORDS:

• Mining Canon
• natural resources
• housing deficit
• commodity boom
• Peru

Disclosure Statement

The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they  represent.

Notes

1. In Peru, a group of municipalities forms a province and a group of provinces forms a region. Peru is divided politically into 25 regions, 196 provinces, and 1,874 municipalities (also called districts).

2. Data accessed September 25, 2017, from https://estadisticas.bcrp.gob.pe/estadisticas/series/anuales/pbi-por-sectores (Central Reserve Bank of Peru).

3. The countries included in the study were Bolivia, Costa Rica, Guatemala, Honduras, Jamaica, Panama, Paraguay, and Peru.

4. Other programs include Mi Construcción (My Construction), a mortgage loan to build or expand an existing house, and Mis Materiales (My Construction Materials). For these two programs, beneficiaries are subject to the credit limit established by national financial institutions. Mi Terreno (My Land) is a credit program for families with scarce resources to enable them to buy land priced up to S/50,000 (US$15,300) to build their house. Mi Casa Más (My House Plus) is a loan to buy a new or used house priced from S/45,000 to S/270,000 (US$13,800 to US$82,500).

5. This survey is conducted every 4 months in metropolitan Lima. We obtained data from the survey corresponding to the quarter October–December 2017.

6. See http://iinei.inei.gob.pe/microdatos (accessed September 29, 2017).

7. See Dell (2010), who used ENAHO to study how institutions established in Peru in colonial times still affect inequality, consumption, and stunting among children. Also, Hunt (2007) used ENAHO to study how corruption affects people’s behavior after they have been adversely affected by crime.

8. BOOST data for Peru are available at http://wbi.worldbank.org/boost/country/peru (accessed September 28, 2017).

9. We also ran the regressions using the value of expenditures over households in the district, but the results were similar in terms of the statistical significance.

10. These results align well with the findings observed by Loayza and Rigolini (2016), who documented statistically significant positive changes of 9% higher consumption in municipalities that exploited minerals compared with nonproducing municipalities. Our results also align with what Corral et al. (2016) found for the windfall gains from oil exploitation known as the Camisea Fund for Socioeconomic Development, also in Peru. They found an increase in capital expenditures and better infrastructure (e.g., Internet and primary roads) in producing municipalities than in nonproducing ones.

Additional information

Funding

This work was supported by the Inter-American Development Bank [ESW].

Notes on contributors

Nora Libertun de Duren

Nora Libertun de Duren is an expert in urban development and housing at the Inter-American Development Bank, where she leads the research and knowledge agenda. She holds a PhD in urban planning from MIT, a master’s degree in urban design from Harvard University, and a master’s degree in architecture from the University of Buenos Aires. Previously, she was the Director of Planning for New York City DPR and has taught at Columbia University, MIT, and Harvard University. Her articles have been published in prestigious academic journals, including Cities, Urban Studies, Housing Policy Debate, International Journal of Urban & Regional Research, International Journal of Housing Policy, Journal of Planning Education and Research, and City & Community, among others. Nora was the editor of the MIT Journal of Planning and coauthored the books Cities & Sovereignty: Identity Politics in Urban Spaces and Inclusive Cities: Urban Productivity through Gender Equality. She was the recipient of a Fulbright Fellowship, an MIT Presidential Scholarship, a Harvard University merit scholarship, and a University of Buenos Aires Award for highest achievement, among others.

Rene Osorio

Rene Osorio is an economist and civil engineer with the Urban Development and Housing Division (CSD/HUD) at the Inter-American Development Bank (IDB). He holds a PhD in economics from Boston University, a master’s in macroeconomics from Pontificia Universidad Catolica de Chile, and a civil engineering degree from Universidad Nacional de Ingenieria in Nicaragua. Prior to joining the IDB, he was a public finance specialist with the Central Bank of Nicaragua. He has worked for the IDB since 2010 at the Institutions for Development (IFD), on topics such as fiscal policy including public expenditure efficiency, fiscal revenues, citizen security, and identity management, and more recently in urban infrastructure at CSD/HUD.