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The Effect of the UK Stamp Duty Land Tax on Household Mobility

  • Christian A. L. Hilber
  • Teemu Lyytikäinen

We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasi-experimental setting, we isolate the impact of the stamp duty from other determinants of mobility. Our empirical strategy essentially compares similar households with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent. We find that a higher stamp duty strongly negatively affects a household's propensity to move: the 2 percentage-point increase in the stamp duty may reduce mobility of homeowners by around 40 percent. This adverse effect is mainly confined to short-distance and non-job related moves.

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Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0115.

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Date of creation: Jul 2012
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Handle: RePEc:cep:sercdp:0115
Contact details of provider: Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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  1. Schulhofer-Wohl, Sam, 2012. "Negative equity does not reduce homeowners’ mobility," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Feb, pages 1-17.
  2. Coulson, N. Edward & Fisher, Lynn M., 2009. "Housing tenure and labor market impacts: The search goes on," Journal of Urban Economics, Elsevier, vol. 65(3), pages 252-264, May.
  3. Munch, Jakob R. & Rosholm, Michael & Svarer, Michael, 2003. "Are Home Owners Really More Unemployed?," IZA Discussion Papers 872, Institute for the Study of Labor (IZA).
  4. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
  5. Munch, Jakob R. & Rosholm, Michael & Svarer, Michael, 2006. "Home Ownership, Job Duration and Wages," IZA Discussion Papers 2110, Institute for the Study of Labor (IZA).
  6. Ben Dachis & Gilles Duranton & Matthew A. Turner, 2011. "The effects of land transfer taxes on real estate markets: Evidence from a natural experiment in Toronto," Working Papers tecipa-423, University of Toronto, Department of Economics.
  7. Munch, Jakob Roland & Svarer, Michael, 2002. "Rent control and tenancy duration," Journal of Urban Economics, Elsevier, vol. 52(3), pages 542-560, November.
  8. Edward L. Glaeser & Erzo F. P. Luttmer, 1997. "The Misallocation of Housing Under Rent Control," NBER Working Papers 6220, National Bureau of Economic Research, Inc.
  9. Michiel van Leuvensteijn & J. van Ommeren, 2003. "New evidence of the effect of transaction costs on residential mobility," CPB Discussion Paper 18, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2011. "Housing busts and household mobility: an update," Staff Reports 526, Federal Reserve Bank of New York.
  11. Christian A. L. Hilber & Teemu Lyytikäinen & Wouter Vermeulen, 2010. "Capitalization of Central Government Grants into Local House Prices: Panel Data Evidence from England," SERC Discussion Papers 0057, Spatial Economics Research Centre, LSE.
  12. Fernando Ferreira & Joseph Gyourko & Joseph Tracy, 2008. "Housing Busts and Household Mobility," NBER Working Papers 14310, National Bureau of Economic Research, Inc.
  13. Lee, David S. & Card, David, 2008. "Regression discontinuity inference with specification error," Journal of Econometrics, Elsevier, vol. 142(2), pages 655-674, February.
  14. Svarer, Michael & Rosholm, Michael & Munch, Jakob Roland, 2005. "Rent control and unemployment duration," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2165-2181, December.
  15. Harminder Battu & Ada Ma & Euan Phimister, 2008. "Housing Tenure, Job Mobility and Unemployment in the UK," Economic Journal, Royal Economic Society, vol. 118(527), pages 311-328, 03.
  16. (IFS), Institute for Fiscal Studies & Mirrlees, James (ed.), 2011. "Tax By Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553747, March.
  17. van Leuvensteijn, Michiel & Koning, Pierre, 2004. "The effect of home-ownership on labor mobility in the Netherlands," Journal of Urban Economics, Elsevier, vol. 55(3), pages 580-596, May.
  18. Benjamin Dachis, 2012. "Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 364, October.
  19. Emmanuel Saez, 1999. "Do Taxpayers Bunch at Kink Points?," NBER Working Papers 7366, National Bureau of Economic Research, Inc.
  20. Davidoff, Ian & Leigh, Andrew, 2013. "How Do Stamp Duties Affect the Housing Market?," IZA Discussion Papers 7463, Institute for the Study of Labor (IZA).
  21. Wojciech Kopczuk & David Munroe, 2015. "Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 214-57, May.
  22. Henrik J. Kleven & Mazhar Waseem, 2013. "Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan," The Quarterly Journal of Economics, Oxford University Press, vol. 128(2), pages 669-723.
  23. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics.
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