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Property taxation, bounded rationality and housing prices
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Report (Other academic)
Abstract [en]

In 2008, the Swedish property tax was reformed and a cap on yearly tax liabilities

was introduced. A large fraction of owner occupied houses was subject to a substantial

decrease in the tax. When the reform was announced, most analysts projected - in

line with tax capitalization theory - that the tax decrease would lead to signicant

increases in house prices. We estimate price responses and capitalization degrees,

using various DID strategies, in which the price dynamics of houses that were subject

to a generous tax reduction are compared to the price dynamics of houses with a more

modest reduction. Our results are largely inconsistent with capitalization theory. For

the majority of properties, we nd no evidence that the tax cut led to increases in

house prices. However, we nd evidence of partial capitalization in sub-markets with

highly valued properties, highly educated citizens and were it is especially dicult to

increase supply. We argue that theories of bounded rationality can help explain why

house buyers may fail to take a tax decrease into account in the valuation of houses.

Place, publisher, year, edition, pages
2014. , 38 p.
Series
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975
Keyword [en]
announcement eects, capitalization, nancial literacy, housing
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-224854OAI: oai:DiVA.org:uu-224854DiVA: diva2:718674
Available from: 2014-05-21 Created: 2014-05-21 Last updated: 2014-05-23Bibliographically approved

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Elinder, MikaelPersson, Lovisa

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf