Incentives to Borrow and the Demand for Mortgage Debt: An Analysis of Tax Reforms
Before 1992 mortgage interest in Italy was fully tax deductible up to 3,500 euro (7,000 for two cosigners). Between 1992-94 the government implemented a series of tax reforms whose ultimate effect was to cancel the relation between the after-tax mortgage rate and the marginal tax rate. Using data from the 1987-2000 Survey of Household Income and Wealth we test if the cancellation of incentives has reduced the propensity to borrow of high-income taxpayers relative to the other population groups. Difference-in-differences estimates and regression analysis indicate that tax considerations have not affected the demand for mortgage debt, either at the extensive or intensive margin.
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- Patric H. Hendershott & Dr. Gwilyn Pryce & Dr. Michael White, 2002. "Household Leverage and the Deductibility of Home Mortgage Interest: Evidence from UK House Purchasers," NBER Working Papers 9207, National Bureau of Economic Research, Inc.
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"Household Portfolios in Italy,"
CSEF Working Papers
43, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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