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Capitalisation of Fiscal Variables and Land Scarcity

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  • David Stadelmann
  • Steve Billon

Abstract

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.

Suggested Citation

  • David Stadelmann & Steve Billon, 2012. "Capitalisation of Fiscal Variables and Land Scarcity," Urban Studies, Urban Studies Journal Limited, vol. 49(7), pages 1571-1594, May.
    • Handle: RePEc:sae:urbstu:v:49:y:2012:i:7:p:1571-1594
    DOI: 10.1177/0042098011415433
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    2. Martinez, Isabel Z., 2016. "Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland," VfS Annual Conference 2016 (Augsburg): Demographic Change 145643, Verein für Socialpolitik / German Economic Association.
    3. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
    4. Frank Peck & Simon Parry & Gail Mulvey & Keith Jackson & Ignazio Cabras & Jacqui Jackson, 2014. "The Role and Significance of Rates Relief for Supporting Businesses in Wales," Environment and Planning C, , vol. 32(6), pages 982-999, December.
    5. Paul Frijters & Benno Torgler & Grace Gao & Daniel Melser, 2016. "Revealed Preference Measures of Quality of Life in Australia's Urban and Regional Areas," The Economic Record, The Economic Society of Australia, vol. 92, pages 15-29, June.
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    More about this item

    JEL classification:

    • 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
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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