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Size of home, homeownership, and the mortgage interest deduction

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  • Hanson, Andrew

Abstract

This paper offers an empirical test of the effect of the mortgage interest deduction (MID) on both the extensive (own vs. rent) and intensive (size of home) housing purchase margins. Using state level differences in MID availability to identify, I examine this relationship using standard ordinary least squares, instrumental variables, regression discontinuity, and sample selection estimation techniques. I find the MID to be responsible for a 10.9–18.4% increase in the size of home purchased, but that no relationship exists between the MID and home ownership. These results imply an elasticity of home size with respect to changes in user cost between −1 and −1.4.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Housing Economics.

Volume (Year): 21 (2012)
Issue (Month): 3 ()
Pages: 195-210

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Handle: RePEc:eee:jhouse:v:21:y:2012:i:3:p:195-210

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Web page: http://www.elsevier.com/locate/inca/622881

Related research

Keywords: Mortgage interest deduction; Home ownership; Home size;

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Cited by:
  1. Wodon, Quentin, 2014. "Comparing Itemized Tax Deductions across States: A Simple Decomposition Applied to Mortgage Interest Deductions," MPRA Paper 56940, University Library of Munich, Germany.
  2. Iwata, Shinichiro & Yukutake, Norifumi, 2013. "Housing subsidy or parental support: Crowding-out effect of mortgage tax deduction," MPRA Paper 46647, University Library of Munich, Germany.

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