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- Title
Welfare Effects of Housing Transaction Taxes: A Quantitative Analysis with an Assignment Model.
- Authors
Määttänen, Niku; Terviö, Marko
- Abstract
We evaluate the welfare cost of housing transaction taxes with a new assignment model-based framework, where welfare effects are driven by distortions in the matching of houses and households. We calibrate the model with data from the Helsinki metropolitan region to assess the impact of a reform where an ad valorem transaction tax is replaced with a revenue-equivalent property tax. The aggregate welfare gain from this reform increases rapidly with the initial transaction tax rate, with the Laffer curve peaking at about 10%. The proportion of households that lose out from the reform is nevertheless increasing in the tax rate. We compare our model-based counterfactual aggregate welfare results with welfare calculations based on reduced-form estimates from previous policy evaluation studies; they are broadly in line, despite the latter using data from different housing markets at various levels and changes of the tax rate.
- Subjects
HELSINKI (Finland); TAX rates; TAXATION; PROPERTY tax; QUANTITATIVE research; HOUSING
- Publication
Economic Journal, 2022, Vol 132, Issue 644, p1566
- ISSN
0013-0133
- Publication type
Article
- DOI
10.1093/ej/ueab080