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

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

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 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.

Suggested Citation

  • Lyytikäinen, Teemu & Hilber, Christian A. L., 2013. "Housing transfer taxes and household mobility: Distortion on the housing or labour market?," Working Papers 47, VATT Institute for Economic Research.
  • Handle: RePEc:fer:wpaper:47
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    More about this item

    Keywords

    Stamp duty; Housing transfer taxes; Transaction costs; Homeownership; Household mobility; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot; D230 - Organizational Behavior; Transaction Costs; Property Rights; H210 - Taxation and Subsidies: Efficiency; Optimal Taxation; H270 - Taxation; Subsidies; and Revenues: Other Sources of Revenue (Lottery); J610 - Geographic Labor Mobility; Immigrant Workers; R210 - Urban; Rural; and Regional Economics: Housing Demand; R310 - Housing Supply and Markets; R380 - Urban; Rural; and Regional Economics: Production Analysis and Firm Location: Government Policies; Regulatory Policies (Rent Control);
    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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