Transfer taxes and household mobility: Distortion on the housing or labor market?

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Journal of Urban Economics, ISSN: 0094-1190, Vol: 101, Page: 57-73

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Christian A.L. Hilber; Teemu Lyytikäinen
Elsevier BV
Economics, Econometrics and Finance; Social Sciences
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article description
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.