Hilber, Christian and Lyytikainen, Teemu (2012) Stamp duty and household mobility: regression discontinuity evidence from the UK. London School of Economics and Political Science. (Unpublished)
We estimate the effect of the UK real estate transfer tax on household mobility using household level panel data. We exploit a discontinuity in the tax schedule as a quasiexperimental setting which allows us to isolate the impact of the stamp duty from other determinants of mobility. Our empirical strategy compares households with self-assessed house values on either sides of a cut-off value where stamp duty liabilities jump sharply while controlling for flexible but smooth functions of house values. We find that a higher stamp duty negatively affects a household’s propensity to move and the expectation that a move is imminent. Our results suggest that a £5,000 increase in the stamp duty reduces mobility by roughly 30 percent. We conclude that the UK stamp duty adversely affects the functioning of housing- and labor markets.
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