IDEAS home Printed from https://ideas.repec.org/p/hal/journl/halshs-00482997.html
   My bibliography  Save this paper

Capitalization of fiscal variables and land scarcity

Author

Listed:
  • Steve Billon

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • David Stadelmann

    (Departement of Economics - Albert-Ludwigs-Universität Freiburg = University of Freiburg)

Abstract

Fiscal packages usually capitalize into house prices. But if enough land for construction is available, housing developers can supply new houses and capitalization may disappear. We provide a theoretical model in which income taxes and public services capitalize at lower rates when housing supply elasticity increases. Using an empirical linear interaction model, we estimate the impact of available land for construction on capitalization rates with a panel of Swiss communities. Results indicate that fiscal variables do not capitalize differently in communities where housing supply is constrained by land availability. Thus, land availability is not sufficient for capitalization to disappear.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Steve Billon & David Stadelmann, 2010. "Capitalization of fiscal variables and land scarcity," Post-Print halshs-00482997, HAL.
    • Handle: RePEc:hal:journl:halshs-00482997
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-753, December.
    2. Oates, Wallace E, 1973. "The Effects of Property Taxes and Local Public Spending on Property Values: A Reply and Yet Further Results," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 1004-1008, July-Aug..
    3. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    4. Brasington, David M., 2001. "Capitalization and Community Size," Journal of Urban Economics, Elsevier, vol. 50(3), pages 385-395, November.
    5. Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
    6. David Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, Taylor & Francis Journals, vol. 18(3), pages 395-413, January.
    7. Michael S. Johnson & Michael J. Lea, 1982. "Differential Capitalization of Local Public Service Characteristics," Land Economics, University of Wisconsin Press, vol. 58(2), pages 189-203.
    8. Hamilton, Bruce W, 1976. "The Effects of Property Taxes and Local Public Spending on Property Values: A Theoretical Comment," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 647-650, June.
    9. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    10. Patrick Bajari & Matthew E. Kahn, 2005. "Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 20-33, January.
    11. J. Vernon Henderson & Jacques-Francois Thisse, 2001. "On Strategic Community Development," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 546-569, June.
    12. Yinger, John, 1982. "Capitalization and the Theory of Local Public Finance," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 917-943, October.
    13. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    14. Stull, William J. & Stull, Judith C., 1991. "Capitalization of local income taxes," Journal of Urban Economics, Elsevier, vol. 29(2), pages 182-190, March.
    15. Steven C. Bourassa & Martin Hoesli & Donato Scognamiglio & Philippe Sormani, 2008. "Constant-Quality House Price Indexes for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(IV), pages 561-575, December.
    16. David N. Figlio & Maurice E. Lucas, 2004. "What's in a Grade? School Report Cards and the Housing Market," American Economic Review, American Economic Association, vol. 94(3), pages 591-604, June.
    17. Stadelmann, David, 2010. "Which factors capitalize into house prices? A Bayesian averaging approach," Journal of Housing Economics, Elsevier, vol. 19(3), pages 180-204, September.
    18. Reback, Randall, 2005. "House prices and the provision of local public services: capitalization under school choice programs," Journal of Urban Economics, Elsevier, vol. 57(2), pages 275-301, March.
    19. Mitchell Polinsky, A. & Shavell, Steven, 1976. "Amenities and property values in a model of an urban area," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 119-129.
    20. David M. Brasington, 2000. "Demand and Supply of Public School Quality in Metropolitan Areas: The Role of Private Schools," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 583-605, August.
    21. Wales, T J & Wiens, E G, 1974. "Capitalization of Residential Property Taxes: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 329-333, August.
    22. Edel, Matthew & Sclar, Elliott, 1974. "Taxes, Spending, and Property Values: Supply Adjustment in a Tiebout-Oates Model," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 941-954, Sept./Oct.
    23. Oded Palmon & Baron A. Smith, 1998. "New Evidence on Property Tax Capitalization," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1099-1128, October.
    24. Henderson, J Vernon, 1980. "Community Development: The Effects of Growth and Uncertainty," American Economic Review, American Economic Association, vol. 70(5), pages 894-910, December.
    25. Chinloy, Peter T., 1978. "Depreciation, adverse selection and housing markets," Journal of Urban Economics, Elsevier, vol. 5(2), pages 172-187, April.
    26. Henderson, J Vernon, 1985. "The Tiebout Model: Bring Back the Entrepreneurs," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 248-264, April.
    27. Yinger, John, 1981. "Capitalization and the Median Voter," American Economic Review, American Economic Association, vol. 71(2), pages 99-103, May.
    28. Reinhard, Raymond M, 1981. "Estimating Property Tax Capitalization: A Further Comment," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1251-1260, December.
    29. Brasington, David M., 2002. "Edge versus center: finding common ground in the capitalization debate," Journal of Urban Economics, Elsevier, vol. 52(3), pages 524-541, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roberto Basile & Valerio Filoso, 2018. "The market value of political partisanship: Quasi‐experimental evidence from municipal elections," Papers in Regional Science, Wiley Blackwell, vol. 97(S1), pages 193-209, March.
    2. Martinez, Isabel Z., 2016. "Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland," VfS Annual Conference 2016 (Augsburg): Demographic Change 145643, Verein für Socialpolitik / German Economic Association.
    3. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
    4. Frank Peck & Simon Parry & Gail Mulvey & Keith Jackson & Ignazio Cabras & Jacqui Jackson, 2014. "The Role and Significance of Rates Relief for Supporting Businesses in Wales," Environment and Planning C, , vol. 32(6), pages 982-999, December.
    5. Paul Frijters & Benno Torgler & Grace Gao & Daniel Melser, 2016. "Revealed Preference Measures of Quality of Life in Australia's Urban and Regional Areas," The Economic Record, The Economic Society of Australia, vol. 92, pages 15-29, June.
    6. Han, Dan & Wu, Shuping, 2023. "The capitalization and urbanization effect of subway stations: A network centrality perspective," Transportation Research Part A: Policy and Practice, Elsevier, vol. 176(C).
    7. Brasington, David M. & Parent, Olivier, 2024. "Fire protection services and house prices: A regression discontinuity investigation," Regional Science and Urban Economics, Elsevier, vol. 105(C).
    8. Anping Chen & Marlon Boarnet & Mark Partridge & Siqi Zheng & Weizeng Sun & Rui Wang, 2014. "Land Supply And Capitalization Of Public Goods In Housing Prices: Evidence From Beijing," Journal of Regional Science, Wiley Blackwell, vol. 54(4), pages 550-568, September.
    9. Weizeng Sun & Siqi Zheng & David M. Geltner & Rui Wang, 2017. "The Housing Market Effects of Local Home Purchase Restrictions: Evidence from Beijing," The Journal of Real Estate Finance and Economics, Springer, vol. 55(3), pages 288-312, October.
    10. Sun, Weizeng & Zheng, Siqi & Wang, Rui, 2015. "The capitalization of subway access in home value: A repeat-rentals model with supply constraints in Beijing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 104-115.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    2. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    3. Stadelmann, David, 2010. "Which factors capitalize into house prices? A Bayesian averaging approach," Journal of Housing Economics, Elsevier, vol. 19(3), pages 180-204, September.
    4. Brasington, David M., 2002. "Edge versus center: finding common ground in the capitalization debate," Journal of Urban Economics, Elsevier, vol. 52(3), pages 524-541, November.
    5. Palmon, Oded & Smith, Barton A., 1998. "A New Approach for Identifying the Parameters of a Tax Capitalization Model," Journal of Urban Economics, Elsevier, vol. 44(2), pages 299-316, September.
    6. Grodecka, Anna & Hull, Isaiah, 2019. "The Impact of Local Taxes and Public Services on Property Values," Working Paper Series 374, Sveriges Riksbank (Central Bank of Sweden).
    7. David Stadelmann & Reiner Eichenberger, 2014. "Public debts capitalize into property prices: empirical evidence for a new perspective on debt incidence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 498-529, June.
    8. Anping Chen & Marlon Boarnet & Mark Partridge & Siqi Zheng & Weizeng Sun & Rui Wang, 2014. "Land Supply And Capitalization Of Public Goods In Housing Prices: Evidence From Beijing," Journal of Regional Science, Wiley Blackwell, vol. 54(4), pages 550-568, September.
    9. Keith Dowding & Peter John & Stephen Biggs, 1994. "Tiebout : A Survey of the Empirical Literature," Urban Studies, Urban Studies Journal Limited, vol. 31(4-5), pages 767-797, May.
    10. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia.
    11. Isaiah Hull & Anna Grodecka-Messi, 2022. "Measuring the Impact of Taxes and Public Services on Property Values: A Double Machine Learning Approach," Papers 2203.14751, arXiv.org.
    12. Benjamin Wirth & Davidt Hardt & Isabella Lehmann, 2016. "Capitalization of Local Taxes and Expenditures - The case of Bavarian Municipalities," ERSA conference papers ersa16p773, European Regional Science Association.
    13. David Stadelmann & Reiner Eichenberger, 2008. "Debt Capitalization: A New Perspective on Ricardian Equivalence," CREMA Working Paper Series 2008-30, Center for Research in Economics, Management and the Arts (CREMA).
    14. Giertz, Seth H. & Ramezani, Rasoul & Beron, Kurt J., 2021. "Property tax capitalization, a case study of Dallas County," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    15. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    16. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
    17. Lyu, Xueying, 2024. "Revisiting property tax capitalization," Regional Science and Urban Economics, Elsevier, vol. 108(C).
    18. Sun, Weizeng & Zheng, Siqi & Wang, Rui, 2015. "The capitalization of subway access in home value: A repeat-rentals model with supply constraints in Beijing," Transportation Research Part A: Policy and Practice, Elsevier, vol. 80(C), pages 104-115.
    19. Geoffrey K. Turnbull & Minrong Zheng, 2021. "A Meta‐Analysis of School Quality Capitalization in U.S. House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(4), pages 1120-1171, December.

    More about this item

    Keywords

    capitalization; land scarcity; taxes; local public goods;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • H40 - Public Economics - - Publicly Provided Goods - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00482997. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.