Income taxes, sorting, and the costs of housing: evidence from a boundary discontinuity design

Basten, Christoph; von Ehrlich, Maximilian; Lassman, Andrea (July 2014). Income taxes, sorting, and the costs of housing: evidence from a boundary discontinuity design (CESifo Working Papers 4896). Munich: CESifo GmbH

[img] Text
cesifo1_wp4896.pdf - Published Version
Restricted to registered users only
Available under License Publisher holds Copyright.

Download (2MB) | Request a copy

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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Public Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)

UniBE Contributor:

von Ehrlich, Maximilian

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

CESifo Working Papers

Publisher:

CESifo GmbH

Language:

English

Submitter:

Simon Büchler

Date Deposited:

26 Jul 2017 15:25

Last Modified:

26 Jul 2017 15:25

Uncontrolled Keywords:

local taxation, income taxation, housing prices, income sorting, boundary discontinuity design, spatial differencing

JEL Classification:

C140, H240, H710, R210, R380

BORIS DOI:

10.7892/boris.95004

URI:

https://boris.unibe.ch/id/eprint/95004

Actions (login required)

Edit item Edit item
Provide Feedback