Income Taxes, Sorting, and the Costs of Housing

Open access
Date
2014-07Type
- Working Paper
ETH Bibliography
yes
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Abstract
This paper provides novel evidence on the role of income taxes for residential rents and spatial sorting. Drawing on comprehensive apartment-level data, we identify the effects of tax differentials across municipal boundaries in Switzerland. The boundary discontinuity design (BDD) corrects for unobservable location characteristics such as environmental amenities or the access to public goods and thereby reduces the estimated response of housing prices by one half compared to conventional estimates: we identify an income tax elasticity of rents of about 0.26. We complement this approach with census data on local sociodemographic characteristics and show that about one third of this effect can be traced back to a sorting of high-income households into low-tax municipalities. These findings are robust to a matching approach (MBDD) which compares identical residences on opposite sides of the boundary and a number of further sensitivity checks. Show more
Permanent link
https://doi.org/10.3929/ethz-a-010190276Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
GRUNDSTÜCKPREISE + IMMOBILIENPREISE; ECONOMIC COSTS; KAPITALERTRAGSSTEUERN + EINKOMMENSSTEUERN; Income taxation; LAND PRICES + REAL ESTATE PRICES; Spatial dierencing; Boundary discontinuity design; CAPITAL INCOME TAXES + INCOME TAXES; HOUSING + RENT (LAW OF OBLIGATIONS); SCHWEIZ (MITTELEUROPA). SCHWEIZERISCHE EIDGENOSSENSCHAFT; SWITZERLAND (CENTRAL EUROPE). SWISS CONFEDERATION; Housing prices; Income sorting; Local taxation; VOLKSWIRTSCHAFTLICHE KOSTEN; WOHNUNGSMIETE + MIETZINS (SCHULDRECHT)Organisational unit
03716 - Sturm, Jan-Egbert / Sturm, Jan-Egbert
03840 - Egger, Peter / Egger, Peter
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
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