Capitalization of central government grants into local house prices: panel data evidence from England

Christian Hilber, Teemu Lyytikäinen and Wouter Vermeulen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We explore the impact of central government grants on local house prices in England using a panel data set of local authorities (LAs) from 2001 to 2008. Electoral targeting of grants to LAs by the incumbent national government provides an exogenous source of variation in grants that we exploit to identify their causal effect on house prices. Our results indicate substantial or even full capitalization. We also find that house prices respond more strongly in locations in which new construction is constrained by physical barriers. Our results imply that (i) during our sample period grants were largely used in a way that is valued by the marginal homebuyer and (ii) increases in grants to a LA may mainly benefit the typically better off property owners (homeowners and absentee landlords) in that LA.

Keywords: local public finance; house prices; supply constraints; central government grants (search for similar items in EconPapers)
JEL-codes: H2 H3 H7 H81 R21 R31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010-09
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http://eprints.lse.ac.uk/31778/ Open access version. (application/pdf)

Related works:
Journal Article: Capitalization of central government grants into local house prices: Panel data evidence from England (2011)
Working Paper: Capitalization of Central Government Grants into Local House Prices: Panel Data Evidence from England (2010)
Working Paper: Capitalization of central government grants into local house prices: panel data evidence from England (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:31778

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