Does the Housing Allowance Policy Create a Poverty Trap in the Netherlands?

This study examines the effect of the Dutch housing allowance policy on several household behaviors, which may be creating economic inefficiencies. The income limits for determining eligibility for housing allowance create discontinuities in housing allowance, which are used to implement a fuzzy regression discontinuity design. The results show that while housing allowance makes housing more affordable, it also raises concerns of a possible poverty trap via adverse effects of housing allowance on income and labour supply for