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The effect of the UK stamp duty land tax on household mobility

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  • Hilber, Christian A. L.
  • Lyytikainen, Teemu

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

  • Hilber, Christian A. L. & Lyytikainen, Teemu, 2012. "The effect of the UK stamp duty land tax on household mobility," LSE Research Online Documents on Economics 58605, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:58605
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    References listed on IDEAS

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    Cited by:

    1. Thiess Büttner, 2017. "Welfare Cost of the Real Estate Transfer Tax," CESifo Working Paper Series 6321, CESifo Group Munich.
    2. Eerola, Essi & Määttänen, Niku, 2013. "Matching in the housing market with risk aversion and savings," ETLA Working Papers 3, The Research Institute of the Finnish Economy.
    3. Charles Ka Yui Leung & Tin Cheuk Leung & Kwok Ping Tsang, 2015. "Tax-driven Bunching of Housing Market Transactions: The Case of Hong Kong," International Real Estate Review, Asian Real Estate Society, vol. 18(4), pages 473-501.
    4. Sejeong Ha & Christian A. L. Hilber, 2013. "Do Long Distance Moves Discourage Homeownership? Evidence from England," SERC Discussion Papers 0141, Spatial Economics Research Centre, LSE.
    5. Eerola, Essi, 2016. "Macroprudential measures and housing markets: a note on the empirical literature," Research Discussion Papers 18/2016, Bank of Finland.
    6. 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.
    7. A. Bergeaud & S.Ray, 2017. "Adjustment Costs and Factor Demand: New Evidence From Firms’ Real Estate," Working papers 641, Banque de France.

    More about this item

    Keywords

    stamp duty; real estate transfer tax; transaction costs; household mobility;

    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
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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