Seminar

Seminar: Allocation of Tax Subsidies on New and Old Housing: Theory and Evidence from Luxembourg

On Tuesday March 10th 2020, François Koulischer (University of Luxembourg) will give a presentation titled: "Allocation of Tax Subsidies on New and Old Housing: Theory and Evidence from Luxembourg"

Date
March 10, 2020
Time
13:00 - 14:00
Location
CPB-office, Bezuidenhoutseweg 30, The Hague (Room 3 - Braamzaal)
Presentation
François Koulischer (University of Luxembourg)
Discussant
Jennifer Olsen (CPB)
Working language
English

How should the government set transaction taxes on real estate when it can discriminate between old (existing) housing and new housing? We first show how the optimal tax allocation depends on the elasticity of supply of new housing. All else equal, new housing should benefit from more tax subsidies relative to old housing if supply is elastic. We then estimate the elasticity of the price of new and old houses to taxes using data from Luxembourg, where house prices have increased substantially. For identification, we rely on a discontinuity in the transaction tax rate. We find that the price of old houses responds to the tax, while the price of new houses does not. This suggests that the supply elasticity of new housing is relatively low and that tax subsidies to old houses may be a useful policy instrument.

Contacts

Foto Simone Pailer
Simone Pailer +31 6 21856579 Read more