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Capitalization of fiscal variables and land scarcity

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  • 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.
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  • Steve Billon & David Stadelmann, 2010. "Capitalization of fiscal variables and land scarcity," Post-Print halshs-00497424, HAL.
    • Handle: RePEc:hal:journl:halshs-00497424
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    2. 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.
    3. 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.
    4. 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.
    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.
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    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

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