Housing transfer taxes and household mobility: Distortion on the housing or labour market?

Teemu Lyytikäinen and Christian Hilber

No 47, Working Papers from VATT Institute for Economic Research

Abstract: We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasiexperimental setting, we isolate the impact of the stamp duty from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent and find that a higher stamp duty strongly negatively affects their propensity to move. The 2 percentage-point increase in the stamp duty reduces the annual rate of mobility by between 2 and 3 percentage-points or about 30 percent. This adverse effect is confined to short-distance and non-job related moves, suggesting a distortion in the housing rather than the labour market. As a cross-validation check, we also analyse the distribution of actual transaction prices and find that the tax rate increase reduces the volume of sales by roughly 30 percent.

Keywords: Stamp duty, Housing transfer taxes, Transaction costs, Homeownership, Household mobility, Taxation, Verotus, Taxation and Social Transfers, Julkisen talouden rahoitus ja tulonsiirrot, D230 - Organizational Behavior; Transaction Costs; Property Rights, H210 - Taxation and Subsidies: Efficiency; Optimal Taxation, H270 - Taxation, Subsidies, and Revenues: Other Sources of Revenue (Lottery), J610 - Geographic Labor Mobility; Immigrant Workers, R210 - Urban, Rural, and Regional Economics: Housing Demand, R310 - Housing Supply and Markets, R380 - Urban, Rural, and Regional Economics: Production Analysis and Firm Location: Government Policies; Regulatory Policies (Rent Control), (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eur, nep-mig, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Housing Transfer Taxes and Household Mobility: Distortion on the Housing or Labour Market? (2015)
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