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Housing transfer taxes and household mobility: Distortion on the housing or labour market?

  • Teemu Lyytikäinen
  • Hilber
  • A. L. Christian

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 quasiexperimental setting, we isolate the impact of the stamp duty from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent and find that a higher stamp duty strongly negatively affects their propensity to move. The 2 percentage-point increase in the stamp duty reduces the annual rate of mobility by between 2 and 3 percentage-points or about 30 percent. This adverse effect is confined to short-distance and non-job related moves, suggesting a distortion in the housing rather than the labour market. As a cross-validation check, we also analyse the distribution of actual transaction prices and find that the tax rate increase reduces the volume of sales by roughly 30 percent.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 47.

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Date of creation: 09 Aug 2013
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Handle: RePEc:fer:wpaper:47
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  19. Christian A. L. Hilber & Teemu Lyytikainen & Wouter Vermeulen, 2010. "Capitalization of central government grants into local house prices: panel data evidence from England," LSE Research Online Documents on Economics 31778, London School of Economics and Political Science, LSE Library.
  20. Ben Dachis & Gilles Duranton & Matthew A. Turner, 2012. "The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto," Journal of Economic Geography, Oxford University Press, vol. 12(2), pages 327-354, March.
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  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.
  24. (IFS), Institute for Fiscal Studies & Mirrlees, James (ed.), 2011. "Tax By Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553747, March.
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