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Property taxes and elderly labor supply

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  • Hui Shan

Abstract

The recent housing market boom in the U.S. has caused sharp increases in residential property taxes. Anecdotal evidence suggests that rising property taxes have induced elderly homeowners to increase their labor supply. This paper uses 1992-2004 panel data from the Health and Retirement Study (HRS) as well as a newly collected dataset on state-provided property tax relief programs to investigate the effect of property taxes on the labor supply of elderly homeowners. It is the first rigorous study on the link between property taxes and elderly labor supply. I examine both the extensive margin - whether elderly homeowners delay retirement or reenter the labor market in the face of rising property taxes, and the intensive margin - whether elderly homeowners work longer hours when property taxes increase. A simulated IV approach is used to address the potential endogeneity problem associated with property taxes. I find little evidence that property taxes have a significant impact on elderly homeowners' decisions to retire, to re-enter the labor force, or to increase working hours.

Suggested Citation

  • Hui Shan, 2008. "Property taxes and elderly labor supply," Finance and Economics Discussion Series 2008-51, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2008-51
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    References listed on IDEAS

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    Keywords

    Property tax; Labor supply;

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