Tax arbitrage incentives for mortgage prepayment behavior: Evidence from Dutch micro data
This feature is used to estimate tax elasticities (i.e. the elasticity of changes in wealth tax revenues resulting from changes in prepayment with respect to the wealth tax rate). Using a linear probability model with the Arellano-Bond estimator, the paper finds that the prepayment probability increases by 0.5% point if the prepayment value as a fraction of the mortgage increases by 1% point. The effect is about six times as high for households owning more than 200,000 euro and it is not statistically significant for households with little financial wealth.