Capitalization of central government grants into local house prices: panel data evidence from England
We explore the impact of central government grants on local house prices in England using a panel data set of local authorities (LAs) from 2001 to 2008. Electoral targeting of grants to LAs by the incumbent national government provides an exogenous source of variation in grants that we exploit to identify their causal effect on house prices. Our results indicate substantial or even full capitalization. We also find that house prices respond more strongly in locations in which new construction is constrained by physical barriers. Our results imply that (i) during our sample period grants were largely used in a way that is valued by the marginal homebuyer and (ii) increases in grants to a LA may mainly benefit the typically better off property owners (homeowners and absentee landlords) in that LA.
|Date of creation:||Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Y. Albouy, 2008.
"The Unequal Geographic Burden of Federal Taxation,"
NBER Working Papers
13995, National Bureau of Economic Research, Inc.
- Christian A. L. Hilber & Wouter Vermeulen, 2012.
"The impact of supply constraints on house prices in England,"
LSE Research Online Documents on Economics
59254, London School of Economics and Political Science, LSE Library.
- Christian A. L. Hilber & Wouter Vermeulen, 2013. "The impact of supply constraints on house prices in England," Working Papers 2013/28, Institut d'Economia de Barcelona (IEB).
- Wouter Vermeulen & Christian A.L. Hilber, 2012. "The Impact of Supply Constraints on House Prices in England," CPB Discussion Paper 219, CPB Netherlands Bureau for Economic Policy Analysis.
- Christian A. L. Hilber & Wouter Vermeulen, 2012. "The Impact of Supply Constraints on House Prices in England," SERC Discussion Papers 0119, Spatial Economics Research Centre, LSE.
- Barrow, Lisa & Rouse, Cecilia Elena, 2004.
"Using market valuation to assess public school spending,"
Journal of Public Economics,
Elsevier, vol. 88(9-10), pages 1747-1769, August.
- Lisa Barrow & Cecilia Elena Rouse, 2002. "Using Market Valuation to Assess Public School Spending," NBER Working Papers 9054, National Bureau of Economic Research, Inc.
- Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
- Ross, Stephen & Yinger, John, 1999. "Sorting and voting: A review of the literature on urban public finance," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 47, pages 2001-2060 Elsevier.
- Dahlberg, Matz & Johansson, Eva, 1999.
"On the Vote Purchasing Behavior of Incumbent Governments,"
Working Paper Series
1999:24, Uppsala University, Department of Economics.
- Dahlberg, M. & Johansson, E., 1999. "On the Vote Purchasing Behavior of Incumbent Governments," Papers 1999:24, Uppsala - Working Paper Series.
- McMillen, Daniel P., 2008. "Changes in the distribution of house prices over time: Structural characteristics, neighborhood, or coefficients?," Journal of Urban Economics, Elsevier, vol. 64(3), pages 573-589, November.
- Paul Gary Wyckoff, 1995. "Capitalization, Equalization, and Intergovernmental Aid," Public Finance Review, , vol. 23(4), pages 484-508, October.
- Brian Knight, 2002. "Endogenous Federal Grants and Crowd-out of State Government Spending: Theory and Evidence from the Federal Highway Aid Program," American Economic Review, American Economic Association, vol. 92(1), pages 71-92, March.
- Wyckoff, Paul Gary, 1988. "A bureaucratic theory of flypaper effects," Journal of Urban Economics, Elsevier, vol. 23(1), pages 115-129, January.
- Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March.
- Hanson, Andrew, 2009. "Local employment, poverty, and property value effects of geographically-targeted tax incentives: An instrumental variables approach," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 721-731, November.
- Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
- Oded Palmon & Baron A. Smith, 1998. "New Evidence on Property Tax Capitalization," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1099-1128, October.
- Chaudry-Shah, Anwar, 1988. " Capitalization and the Theory of Local Public Finance: An Interpretive Essay," Journal of Economic Surveys, Wiley Blackwell, vol. 2(3), pages 209-43.
- Brueckner, Jan K., 1982. "A test for allocative efficiency in the local public sector," Journal of Public Economics, Elsevier, vol. 19(3), pages 311-331, December.
- Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
- Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
- Bradbury, Katharine L. & Mayer, Christopher J. & Case, Karl E., 2001. "Property tax limits, local fiscal behavior, and property values: evidence from Massachusetts under Proposition," Journal of Public Economics, Elsevier, vol. 80(2), pages 287-311, May.
- Christian A. L. Hilber & Christopher J. Mayer, 2002.
"Why do households without children support local public schools? linking house price capitalization to school spending,"
02-10, Federal Reserve Bank of Philadelphia.
- Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
- Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May.
- Arnott, Richard J & Stiglitz, Joseph E, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 471-500, November.
- Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
- Filimon, Radu & Romer, Thomas & Rosenthal, Howard, 1982. "Asymmetric information and agenda control : The bases of monopoly power in public spending," Journal of Public Economics, Elsevier, vol. 17(1), pages 51-70, February.
When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:31778. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (LSERO Manager)
If references are entirely missing, you can add them using this form.