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Capitalization of fiscal variables and land scarcity

Listed author(s):
  • Steve Billon

    ()

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - CNRS - Centre National de la Recherche Scientifique)

  • David Stadelmann

    ()

    (Departement of Economics - University of Fribourg)

Fiscal packages usually capitalize into house prices. But if enough land for construction is available, housing developers can supply new houses and capitalization may disappear. We provide a theoretical model in which income taxes and public services capitalize at lower rates when housing supply elasticity increases. Using an empirical linear interaction model, we estimate the impact of available land for construction on capitalization rates with a panel of Swiss communities. Results indicate that fiscal variables do not capitalize differently in communities where housing supply is constrained by land availability. Thus, land availability is not sufficient for capitalization to disappear.

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Paper provided by HAL in its series Post-Print with number halshs-00497424.

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Date of creation: 03 Jun 2010
Publication status: Published in 27èmes journées de microéconomie appliquée, Jun 2010, Angers, France
Handle: RePEc:hal:journl:halshs-00497424
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00497424
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Brasington, David M., 2001. "Capitalization and Community Size," Journal of Urban Economics, Elsevier, vol. 50(3), pages 385-395, November.
  2. Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
  3. David M. Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 395-414.
  4. Patrick Bajari & Matthew E. Kahn, 2005. "Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 20-33, January.
  5. Steven C. Bourassa & Martin Hoesli & Donato Scognamiglio & Philippe Sormani, 2008. "Constant-Quality House Price Indexes for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(IV), pages 561-575, December.
  6. David M. Brasington, 2000. "Demand and Supply of Public School Quality in Metropolitan Areas: The Role of Private Schools," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 583-605.
  7. Edel, Matthew & Sclar, Elliott, 1974. "Taxes, Spending, and Property Values: Supply Adjustment in a Tiebout-Oates Model," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 941-954, Sept./Oct.
  8. Chinloy, Peter T., 1978. "Depreciation, adverse selection and housing markets," Journal of Urban Economics, Elsevier, vol. 5(2), pages 172-187, April.
  9. Brasington, David M., 2002. "Edge versus center: finding common ground in the capitalization debate," Journal of Urban Economics, Elsevier, vol. 52(3), pages 524-541, November.
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