The effect of property taxes on house prices: Evidence from the 1993 and the 2012 reforms in Italy

Melisso Boschi (), Valeria Bevilacqua and Carla Di Falco

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We quantify the effect of property tax reforms implemented in Italy in 1993 and 2012 on property prices. We focus on the Italian house prices index using the Interrupted Time Series Analysis (ITSA), a statistical approach that proves to be useful when a counterfactual scenario for policy evaluation is difficult to create due to the universality of intervention. The hypothesis under test is that the two reforms caused a statistically significant discontinuity in the house prices index dynamics. We estimate two alternative versions of the ITSA model ─ one including only Italy, and another one including also similar European countries as control terms (France, Germany, Spain, and the UK). Property tax changes effects are reform-specific. As for the 1993 reform effect on real house prices, we estimate a 13-14 percent decrease of the mean level and a 1 percentage points (p.p.) increase of the rate of growth. As for the 2012 reform, depending on the model chosen, we estimate a 3-5 percent decrease, or a 4 percent increase, in level, as well as a 3-4 p.p. decrease, or a 2 p.p. increase, of the rate of growth.

Keywords: Policy effect evaluation; Property tax; House prices; Property tax capitalization; Tax reforms; Interrupted Time Series Analysis (search for similar items in EconPapers)
JEL-codes: C32 H20 R21 R31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021-09
New Economics Papers: this item is included in nep-eec, nep-eur, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-82

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