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How Inheritance Affects the Real Estate Market in an Aging Economy: Evidence from Transaction and Registry Data

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  • Mizuta, Takeshi
  • Shimizu, Chihiro
  • Uesugi, Iichiro
  • 植杉, 威一郎

Abstract

The impact of population aging on real estate prices has been closely scrutinized by Mankiw and Weil (1989) and others. This paper sheds new light on the literature on asset meltdown by examining the mechanism how the death of property owners and subsequent inheritances affect the realty market. By combining the unpredictable nature of death and inheritance and the unique characteristics of the Japanese tax system, which provides an incentive to heirs to sell inherited properties shortly after inheriting them, we use the incidence of inheritance to instrument for the supply of real estate and examine the causal relationship between supply and realty prices to find the following. First, a higher incidence of inheritance results in a larger number of properties for sale. Second, a larger number of properties for sale as a result of inheritances decreases transaction prices in the real estate market. And third, there exists a substantial difference in the demand elasticity of real estate property depending on whether land use regulations were relaxed or tightened.

Suggested Citation

  • Mizuta, Takeshi & Shimizu, Chihiro & Uesugi, Iichiro & 植杉, 威一郎, 2016. "How Inheritance Affects the Real Estate Market in an Aging Economy: Evidence from Transaction and Registry Data," RCESR Discussion Paper Series DP16-3, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rcesrs:dp16-3
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    More about this item

    Keywords

    Real estate market; Realty prices; Inheritance tax; Instruments;
    All these keywords.

    JEL classification:

    • 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
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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