Financial Restrictions, Personal Income Tax (PIT) and Demand for a Permanent Home in a Dynamic Model. An analysis with Panel Data for Spain

Cesar Pérez-López, Desiderio Romero-Jordan () and José Felix Sanz-Sanz
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Cesar Pérez-López: Universidad Complutense de Madrid
José Felix Sanz-Sanz: Universidad Complutense de Madrid

Public Economics from University Library of Munich, Germany

Abstract: This paper analyzes the way in which income tax and liquidity determine the purchase or rental of a permanent home in Spain. To do this, we have developed a theoretical dynamic model based on Euler’s equation. This model is verified using a sample from the 1991-1995 Panel of income taxpayers. Results suggest that the degree of financial restriction is the most relevant variable when determining the possibility of purchasing a home, while tax incentives increase their relative weighting once this asset has been acquired. Incentives for renting a home are relatively insignificant particularly for taxpayers who habitually rent their homes.

Keywords: personal income tax; liquidity; permanent home; tax incentives (search for similar items in EconPapers)
JEL-codes: H21 H24 H31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-07-08
New Economics Papers: this item is included in nep-pbe
Note: Type of Document - pdf; pages: 25
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwppe:0407005

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