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Capitalisation of Fiscal Variables and Land Scarcity

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  • David Stadelmann
  • Steve Billon

Abstract

Fiscal packages usually capitalise into house prices. Yet if enough land for construction is available, housing developers could supply new houses and capitalisation may disappear. This paper provides a theoretical model in which income taxes and public services capitalise at lower rates when housing supply elasticity increases. Using an empirical linear interaction model, we estimate the impact of available land for construction on capitalisation rates with a panel of Swiss communities. Results indicate that fiscal variables do not capitalise differently in communities where housing supply is constrained by land availability. Thus, land availability is a necessary but not sufficient condition for capitalisation to disappear.

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Bibliographic Info

Article provided by Urban Studies Journal Limited in its journal Urban Studies.

Volume (Year): 49 (2012)
Issue (Month): 7 (May)
Pages: 1571-1594

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Handle: RePEc:sae:urbstu:v:49:y:2012:i:7:p:1571-1594

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Web page: http://www.gla.ac.uk/departments/urbanstudiesjournal

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Cited by:
  1. Christoph A. Schaltegger & Frank Somogyi & Jan-Egbert Sturm, 2009. "Tax Competition and Income Sorting: Evidence from the Zurich Metropolitan Area," CREMA Working Paper Series 2009-25, Center for Research in Economics, Management and the Arts (CREMA).

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