Housing Transfer Taxes and Household Mobility: Distortion on the Housing or Labour Market?

Christian A. L. Hilber, Teemu Lyytikäinen
2013 Social Science Research Network  
We estimate the effect of the UK Stamp Duty Land Tax on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasi-experimental setting, we isolate the impact of the stamp duty from other determinants of mobility. We compare homeowners with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1 to 3 percent and find that a higher stamp duty strongly negatively affects their propensity to move. The 2 percentage-point
more » ... ncrease in the stamp duty reduces the annual rate of mobility by between 2 and 3 percentage points. This adverse effect is confined to short-distance and non-job related moves, suggesting a distortion in the housing rather than the labour market. As a cross-validation check, we also document bunching of transaction prices at the cut-off and find that the tax rate increase reduces the volume of sales by roughly 30 percent. JEL classification: D23, H21, H27, J61, R21, R31, R38.
doi:10.2139/ssrn.2308744 fatcat:z2kvwijfyjfy3odofix6xh6glu