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How do Households Value the Future? Evidence from Property Taxes

Hans R. A. Koster and Edward Pinchbeck

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Despite the near ubiquity of inter-temporal choice, there is little consensus on the rate at which individuals trade present and future costs and benefits. We contribute to this debate by estimating discount rates from extensive data on housing transactions and spatio-temporal variation in property taxes in England. Our findings imply long-term average discount rates that are between 3 and 4%. The close correspondence to prevailing market interest rates gives little reason to suggest that households misoptimise by materially undervaluing very long term financial flows in this high stakes context.

Keywords: housing; property taxes; discount rate; capitalisation rate; undervaluation (search for similar items in EconPapers)
JEL-codes: G10 R30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ure
Date: 2018-09
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Working Paper: How do Households Value the Future? Evidence from Property Taxes (2018) Downloads
Working Paper: How do households value the future? Evidence from property taxes (2018) Downloads
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