Incentives to Borrow and the Demand for Mortgage Debt: An Analysis of Tax Reforms
Tullio Jappelli () and
Luigi Pistaferri ()
CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy
Before 1992 mortgage interest in Italy was fully tax deductible up to 3,500 Euro (7,000 for two cosigners). In 1992-94 the government implemented a series of tax reforms whose ultimate effect was to cancel the relation between the after-tax mortgage rate and the marginal tax rate. Using data from the 1987-2000 Survey of Household Income and Wealth we test if the cancellation of incentives has reduced the propensity to borrow of high-income taxpayers relative to the other population groups. Difference-in-differences estimates and regression analysis indicate that tax considerations have not affected the demand for mortgage debt, either at the extensive or intensive margin.
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Published in European Economic Review, February 2007, vol. 51, issue 2, pages 247-273
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Working Paper: Incentives to Borrow and the Demand for Mortgage Debt: An Analysis of Tax Reforms (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:90
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