IDEAS home Printed from https://ideas.repec.org/a/bla/metroe/v70y2019i4p776-792.html
   My bibliography  Save this article

House prices and immovable property tax: Evidence from OECD countries

Author

Listed:
  • Tommaso Oliviero
  • Agnese Sacchi
  • Annalisa Scognamiglio
  • Alberto Zazzaro

Abstract

This paper studies the impact of changes in immovable property tax revenues on the growth rate of house prices by analysing a panel of 34 OECD countries over the period 1970–2014. Starting from the annual series of immovable property tax revenues, we isolate years of significant shifts in the property tax regime and study their impact on house prices. We find a strong negative relationship between increases in immovable property tax revenues and house prices. This relationship is robust to the inclusion of cyclical determinants of house prices, country and year fixed effects, and country‐specific linear trends. We also propose an instrumental variable strategy based on countries’ legal origins that confirms a statistically significant negative impact of such taxes in the short run.

Suggested Citation

  • Tommaso Oliviero & Agnese Sacchi & Annalisa Scognamiglio & Alberto Zazzaro, 2019. "House prices and immovable property tax: Evidence from OECD countries," Metroeconomica, Wiley Blackwell, vol. 70(4), pages 776-792, November.
    • Handle: RePEc:bla:metroe:v:70:y:2019:i:4:p:776-792
    DOI: 10.1111/meca.12253
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/meca.12253
    Download Restriction: no
    File URL: https://libkey.io/10.1111/meca.12253?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Xing, Jing, 2012. "Tax structure and growth: How robust is the empirical evidence?," Economics Letters, Elsevier, vol. 117(1), pages 379-382.
    2. Dan Andrews & Aida Caldera Sánchez & Åsa Johansson, 2011. "Housing Markets and Structural Policies in OECD Countries," OECD Economics Department Working Papers 836, OECD Publishing.
    3. Balázs Égert & Dubravko Mihaljek, 2007. "Determinants of House Prices in Central and Eastern Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(3), pages 367-388, September.
    4. Mr. John Norregaard, 2013. "Taxing Immovable Property Revenue Potential and Implementation Challenges," IMF Working Papers 2013/129, International Monetary Fund.
    5. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    6. Widmalm, Frida, 2001. "Tax Structure and Growth: Are Some Taxes Better Than Others?," Public Choice, Springer, vol. 107(3-4), pages 199-219, June.
    7. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    8. Sung Hoon Kang & Mark Skidmore & Laura Reese, 2015. "The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 300-333, June.
    9. Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-582, November.
    10. Richard Almy, 2014. "Valuation and Assessment of Immovable Property," OECD Working Papers on Fiscal Federalism 19, OECD Publishing.
    11. repec:hal:spmain:info:hdl:2441/75koqefued8i7pihbrl9u84p4u is not listed on IDEAS
    12. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    13. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    14. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
    15. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages 59-80, February.
    16. Michael D. Bordo & Olivier Jeanne, 2002. "Boom-Busts in Asset Prices, Economic Instability, and Monetary Policy," NBER Working Papers 8966, National Bureau of Economic Research, Inc.
    17. Presbitero, Andrea F. & Sacchi, Agnese & Zazzaro, Alberto, 2014. "Property tax and fiscal discipline in OECD countries," Economics Letters, Elsevier, vol. 124(3), pages 428-433.
    18. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    19. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    20. Bai, ChongEn & Li, Qi & Ouyang, Min, 2014. "Property taxes and home prices: A tale of two cities," Journal of Econometrics, Elsevier, vol. 180(1), pages 1-15.
    21. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    22. Rosen, Kenneth T, 1982. "The Impact of Proposition 13 on House Prices in Northern California: A Test of the Interjurisdictional Capitalization Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 191-200, February.
    23. Ojede, Andrew & Yamarik, Steven, 2012. "Tax policy and state economic growth: The long-run and short-run of it," Economics Letters, Elsevier, vol. 116(2), pages 161-165.
    24. Roy Kelly, 2013. "Making the Property Tax Work," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1311, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.
    2. Muhammad Adil Rauf & Olaf Weber, 2022. "Housing Sustainability: The Effects of Speculation and Property Taxes on House Prices within and beyond the Jurisdiction," Sustainability, MDPI, vol. 14(12), pages 1-19, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliviero, Tommaso & Scognamiglio, Annalisa, 2019. "Property tax and property values: Evidence from the 2012 Italian tax reform," European Economic Review, Elsevier, vol. 118(C), pages 227-251.
    2. Durusu-Ciftci, Dilek & Gokmenoglu, Korhan K. & Yetkiner, Hakan, 2018. "The heterogeneous impact of taxation on economic development: New insights from a panel cointegration approach," Economic Systems, Elsevier, vol. 42(3), pages 503-513.
    3. Nazila Alinaghi & W. Robert Reed, 2021. "Taxes and Economic Growth in OECD Countries: A Meta-analysis," Public Finance Review, , vol. 49(1), pages 3-40, January.
    4. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.
    5. Halit Yanikkaya & Taner Turan, 2018. "Tax Structure And Economic Growth: Do Differences In Income Level And Government Effectiveness Matter?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(01), pages 217-237, May.
    6. Silvestro Sanzo & Mariano Bella & Giovanni Graziano, 2017. "Tax Structure and Economic Growth: A Panel Cointegrated VAR Analysis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 3(2), pages 239-253, July.
    7. Marco Alfò & Lorenzo Carbonari & Giovanni Trovato, 2020. "On the Effects of Taxation on Growth: an Empirical Assessment," CEIS Research Paper 480, Tor Vergata University, CEIS, revised 08 May 2020.
    8. Dackehag, Margareta & Hansson, Åsa, 2015. "Taxation of Dividend Income and Economic Growth: The Case of Europe," Working Paper Series 1081, Research Institute of Industrial Economics.
    9. Lucas Menescal & José Alves, 2022. "Optimal Threshold Taxation: An Empirical Investigation for Developing Economies," CESifo Working Paper Series 9782, CESifo.
    10. Andrea Filippetti & Agnese Sacchi, 2016. "Decentralization and economic growth reconsidered: The role of regional authority," Environment and Planning C, , vol. 34(8), pages 1793-1824, December.
    11. Santiago Acosta-Ormaechea & Atsuyoshi Morozumi, 2021. "The value-added tax and growth: design matters," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1211-1241, October.
    12. Zuzana Machová & Igor Kotlán, 2013. "Interakce zdanění, vládních výdajů a ekonomického růstu: panelový VAR model pro země OECD [Interaction of Taxation, Government Expenditure and Economic Growth: Panel VAR Model for OECD Countries]," Politická ekonomie, Prague University of Economics and Business, vol. 2013(5), pages 623-638.
    13. Halit Yanikkaya & Taner Turan, 2020. "Tax Structure And Economic Growth: Do Differences In Income Level And Government Effectiveness Matter?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(01), pages 217-237, March.
    14. Liberati, Danilo & Loberto, Michele, 2019. "Taxation and housing markets with search frictions," Journal of Housing Economics, Elsevier, vol. 46(C).
    15. Agata Drobiszová & Zuzana Machová, 2015. "Vliv fiskální politiky na ekonomický růst v zemích OECD [The Impact of Fiscal Policy on Economic Growth in the OECD Countries]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(3), pages 300-316.
    16. Romero-Ávila, Diego & Strauch, Rolf, 2008. "Public finances and long-term growth in Europe: Evidence from a panel data analysis," European Journal of Political Economy, Elsevier, vol. 24(1), pages 172-191, March.
    17. Mura Petru-Ovidiu, 2015. "Tax Composition And Economic Growth. A Panel-Model Approach For Eastern Europe," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 89-101, February.
    18. Shevlin, Terry & Shivakumar, Lakshmanan & Urcan, Oktay, 2019. "Macroeconomic effects of corporate tax policy," Journal of Accounting and Economics, Elsevier, vol. 68(1).
    19. Colin Davis & Ken‐ichi Hashimoto, 2018. "Corporate Tax Policy And Industry Location With Fully Endogenous Productivity Growth," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1136-1148, April.
    20. Richard Kneller & Florian Misch, 2017. "A Survey On The Output Effects Of Tax Reforms From A Policy Perspective," Contemporary Economic Policy, Western Economic Association International, vol. 35(1), pages 165-192, January.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:70:y:2019:i:4:p:776-792. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.