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Capitalisation of Fiscal Variables and Land Scarcity

  • David Stadelmann
  • Steve Billon

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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File URL: http://usj.sagepub.com/content/49/7/1571.abstract
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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
Contact details of provider: Web page: http://www.gla.ac.uk/departments/urbanstudiesjournal

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  1. Patrick Bajari & Matthew E. Kahn, 2005. "Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 20-33, January.
  2. David M. Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 395-414.
  3. Chinloy, Peter T., 1978. "Depreciation, adverse selection and housing markets," Journal of Urban Economics, Elsevier, vol. 5(2), pages 172-187, April.
  4. Brasington, David M., 2001. "Capitalization and Community Size," Journal of Urban Economics, Elsevier, vol. 50(3), pages 385-395, November.
  5. Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
  6. David M. Brasington, 2000. "Demand and Supply of Public School Quality in Metropolitan Areas: The Role of Private Schools," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 583-605.
  7. Steven C. Bourassa & Martin Hoesli & Donato Scognamiglio & Philippe Sormani, 2008. "Constant-Quality House Price Indexes for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(IV), pages 561-575, December.
  8. Edel, Matthew & Sclar, Elliott, 1974. "Taxes, Spending, and Property Values: Supply Adjustment in a Tiebout-Oates Model," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 941-54, Sept./Oct.
  9. Brasington, David M., 2002. "Edge versus center: finding common ground in the capitalization debate," Journal of Urban Economics, Elsevier, vol. 52(3), pages 524-541, November.
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