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Proposition 13: An Equilibrium Analysis

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  • Ayşe İmrohoroğlu
  • Kyle Matoba
  • Şelale Tüzel

Abstract

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of such policies. In this paper, we examine the implications of one of the most significant tax changes initiated by voters in the United States on house prices, housing turnover, and household welfare. In 1978 California passed Proposition 13, which lowered property tax rates and restricted future property tax increases. We find that the introduction of Proposition 13 leads to a 15 percent increase in house prices and a 3.3 percent decrease in the moving rates. The elimination of Proposition 13, however, leads to modest changes in house prices and mobility but sizable welfare gains.

Suggested Citation

  • Ayşe İmrohoroğlu & Kyle Matoba & Şelale Tüzel, 2018. "Proposition 13: An Equilibrium Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 24-51, April.
  • Handle: RePEc:aea:aejmac:v:10:y:2018:i:2:p:24-51
    Note: DOI: 10.1257/mac.20160327
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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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