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Abstract for:

How do Households Value the Future? Evidence from Property Taxes

Hans R. A.  Koster,  Edward W.  Pinchbeck,  September 2018
Paper No' CEPDP1571: | Full paper (pdf)
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Keywords: housing; property taxes; discount rate; capitalisation rate; undervaluation

JEL Classification: G10; R30

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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Despite the near ubiquity of inter-temporal choice, there is little consensus on the rate at which individuals trade present and future costs and benefits. We contribute to this debate by estimating discount rates from extensive data on housing transactions and spatio-temporal variation in property taxes in England. Our findings imply long-term average discount rates that are between 3 and 4%. The close correspondence to prevailing market interest rates gives little reason to suggest that households misoptimise by materially undervaluing very long term financial flows in this high stakes context.