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The economics implications of house price capitalization a survey of an emerging literature

Hilber, Christian A. L. (2011) The economics implications of house price capitalization a survey of an emerging literature. SERC Discussion Papers, SERCDP0091. Spatial Economics Research Centre (SERC), London School of Economics and Political Science, London, UK.

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Identification Number: SERCDP0091

Abstract

House price capitalization – the adjustment of house prices to changes in local public service and tax levels – has long been thought to be a means of testing for efficiency in the local public sector. In this article I argue that the extent of house price capitalization itself may have important economic implications. In doing so I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader implications of such capitalization. The main insights are: (i) House price capitalization is more pronounced in locations with strict regulatory and/or geographical/physical supply constraints; (ii) capitalization can – under certain conditions – induce the provision of durable local public goods and club goods; and (iii) capitalization effects – which are habitually ignored by policy makers – have important adverse consequences for a wide range of policies such as intergovernmental aid or the mortgage interest deduction

Item Type: Monograph (Discussion Paper)
Official URL: http://www.spatialeconomics.ac.uk/
Additional Information: © 2011 The Author
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice; Clubs; Committees; Associations
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Sets: Departments > Geography and Environment
Research centres and groups > Spatial Economics Research Centre
Date Deposited: 31 Jul 2014 14:41
Last Modified: 31 Jul 2014 14:41
Funders: Economic and Social Research Council, Department for Business, Innovation & Skills (BIS), Welsh Assembly Government
URI: http://eprints.lse.ac.uk/id/eprint/58596

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