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

Christian A. L.  Hilber,  Teemu  Lyytikäinen,  October 2015
Paper No' SERCDP0187: | Full paper (pdf)
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Keywords: Transfer taxes, stamp duty, transaction costs, homeownership, household mobility

JEL Classification: D23; H21; H27; J61; R21; R31; R38

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Abstract:

We estimate the effect of the UK Stamp Duty Land Tax (SDLT) – a transfer tax on the purchase price of property or land – on different types of household mobility using micro data. Exploiting a discontinuity in the tax schedule, we isolate the impact of the tax 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 jumps from 1 to 3 percent. We find that a higher SDLT has a strong negative impact on housing-related and short distance moves but does not adversely affect job-induced or long distance mobility. Overall, our results suggest that transfer taxes may mainly distort housing rather than labor markets.