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

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  • Christian A. L. Hilber
  • Teemu Lyytikäinen

Abstract

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.

Suggested Citation

  • Christian A. L. Hilber & Teemu Lyytikäinen, 2012. "The Effect of the UK Stamp Duty Land Tax on Household Mobility," SERC Discussion Papers 0115, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0115
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    More about this item

    Keywords

    Stamp duty; real estate transfer tax; transaction costs; household mobility;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • 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
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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