Using Cross-Sectional Data from the Two Housing Assistance Supply Experiment

Multiple Choice

Using cross-sectional data from the two Housing Assistance Supply Experiment (HASE) sites--Brown County, Wisconsin, and St.Joseph County, Indiana-- John Mulford of Rand Research estimates the long-run "permanent" income elasticity of housing expenditures to be 0.45 for owners.Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites?

A) Housing expenditures will increase significantly.
B) Housing expenditures in HASE sites will fall significantly as recipients move out of these areas to higher-income areas.
C) Housing expenditures will increase, but not significantly.
D) Housing expenditures will decrease by a small amount.