CORRESPONDENCE - WS-1 OPPOSITION

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prove disruptive. We also allow for possible monetary transfers from landlords of rent -controlled properties to tenants incentivizing them to move. These may represent true tenant buyouts or the amount of buyout that would have been required to rationalize the tenant out -migration, even if in reality the migration was due to eviction. In practice, the city of San Francisco allows for such negotiations and these payments are, in practice, quite prevalent. We do not explicitly model the bargaining game between landlords and tenants. Instead, we proceed in more reduced form fashion and parameterize the transfers as: At (x, dt_r, at -r) = 0 if xt = 8 or dt-r = 0 At (x, dt-1, at -r) = ai [Rt (j, 0) - Rt (j, 1, 7h)] -I- a27n + Ayl [at -r = Y] otherwise. The first equation simply says that, if the tenant does not move or does not live in rent - controlled housing, he receives no transfers. The first term in the second equation denotes the difference between market rents and rent -controlled rents. We would expect the coefficient on this term, Ar, to be weakly positive. Intuitively, the greater the current difference between market rents and rent -controlled rents, the greater the incentive for landlords to remove tenants and thus the more landlords should be willing to pay to convince tenants to leave. We also allow for the outcome of the bargaining to depend on neighborhood tenure 7 ,,, with the impact measured by the coefficient %2. This allows for more invested tenants to receive a larger payment, since their outside option, i.e. choosing to stay, is likely better than that of a short term tenant who has not built up a large stock of neighborhood capital. Finally, we allow the level difference in transfers to differ between young and mature households, measured by Ay. We decompose the unobservable neighborhood amenity value wjt into w,jt = wj -4' w7t, 22