Distortionary Taxation, Excessive Price Sensitivity, and Japanese Land Prices
AbstractJapan has experienced turbulent behavior of land prices after World War II, especially after 1985. This paper first examines the explanatory power of a simple present-value model and shows its limitation. We then investigate two additional (not mutually exclusive) factors affecting the Japanese land price behavior: distortionary inheritance and capital-gains taxation, and excessive price sensitivity due to the non-Walrasian structure of the land market. Empirical results show that distortionary taxation is a major culprit of high residential land price, and that the non-Walrasian price behavior magnifies the effect of underlying change in the market fundamentals.
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Date of creation: Jul 1999
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Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G19 - Financial Economics - - General Financial Markets - - - Other
This paper has been announced in the following NEP Reports:
- NEP-AGR-1999-08-04 (Agricultural Economics)
- NEP-ALL-1999-08-01 (All new papers)
- NEP-CDM-1999-08-04 (Collective Decision-Making)
- NEP-PBE-1999-08-04 (Public Economics)
- NEP-PUB-1999-08-04 (Public Finance)
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