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Housing transfer taxes and household mobility: Distortion on the housing or labour market?

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  • Teemu Lyytikäinen
  • Hilber
  • A. L. Christian

Abstract

We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasiexperimental setting, we isolate the impact of the stamp duty from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent and find that a higher stamp duty strongly negatively affects their propensity to move. The 2 percentage-point increase in the stamp duty reduces the annual rate of mobility by between 2 and 3 percentage-points or about 30 percent. This adverse effect is confined to short-distance and non-job related moves, suggesting a distortion in the housing rather than the labour market. As a cross-validation check, we also analyse the distribution of actual transaction prices and find that the tax rate increase reduces the volume of sales by roughly 30 percent.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 47.

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Date of creation: 09 Aug 2013
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Handle: RePEc:fer:wpaper:47

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Keywords: Stamp duty; housing transfer taxes; transaction costs; homeownership; household mobility;

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References

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  23. Benjamin Dachis, 2012. "Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 364, October.
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Citations

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Cited by:
  1. Sejeong Ha & Christian A. L. Hilber, 2013. "Do Long Distance Moves Discourage Homeownership? Evidence from England," SERC Discussion Papers 0141, Spatial Economics Research Centre, LSE.
  2. Eerola, Essi & Määttänen, Niku, 2013. "Matching in the housing market with risk aversion and savings," ETLA Working Papers 3, The Research Institute of the Finnish Economy.
  3. Benjamin Dachis, 2012. "Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 364, October.

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