Property Taxes, Property Prices and Wealth Inequality: The role of recurrent property tax in the interaction between wealth inequality, property prices and homeownership rate with a special focus on Sweden.
(2024) NEKH02 20232Department of Economics
- Abstract
- This paper examines the effect of the recurrent tax on immovable property on wealth distribution. It also investigates how the wealth distributive effect of property prices is affected by the homeownership rate in a country. Data on the mean to median wealth ratio, tax sizes, property prices, homeownership rate, and economic freedom of 36 OECD member countries over the years 2000-2021 are used to execute various panel regressions with two-way fixed effects. Although not finding a significant relationship between the sizes of different taxes and wealth inequality, the results show that changes in property prices have a statistically significant effect on wealth distribution. Moreover, this effect varies depending on the homeownership rate... (More)
- This paper examines the effect of the recurrent tax on immovable property on wealth distribution. It also investigates how the wealth distributive effect of property prices is affected by the homeownership rate in a country. Data on the mean to median wealth ratio, tax sizes, property prices, homeownership rate, and economic freedom of 36 OECD member countries over the years 2000-2021 are used to execute various panel regressions with two-way fixed effects. Although not finding a significant relationship between the sizes of different taxes and wealth inequality, the results show that changes in property prices have a statistically significant effect on wealth distribution. Moreover, this effect varies depending on the homeownership rate of a country. In countries with a homeownership rate of more than 75.8 percent, increasing property prices seems to have a wealth equalising effect while the effect is the opposite for countries with lower homeownership rates. Hence, national policy decisions regarding property prices and wealth inequality should take homeownership rate into consideration. Assuming that low wealth inequality and a fair tax design is desirable, a policy recommendation is made for Sweden. Based on previous research and theory, we suggest reimplementing a progressive or proportional recurrent tax on immovable property. Based on the results of this paper we suggest removing tax deductions for interest rates and centralising decision making on housing construction. Due to the lack of empirical evidence, the validity of the policy suggestion for a reintroduction of recurrent tax on immovable property is weakened. Thus, further research is needed to examine if there is a relationship between recurrent property tax and wealth distribution. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9145864
- author
- Fröderberg, Emil LU and Björk, Erik LU
- supervisor
- organization
- course
- NEKH02 20232
- year
- 2024
- type
- M2 - Bachelor Degree
- subject
- keywords
- recurrent property tax, wealth inequality, homeownership rate, property prices
- language
- English
- id
- 9145864
- date added to LUP
- 2024-04-16 09:26:20
- date last changed
- 2024-04-16 09:26:20
@misc{9145864,
abstract = {{This paper examines the effect of the recurrent tax on immovable property on wealth distribution. It also investigates how the wealth distributive effect of property prices is affected by the homeownership rate in a country. Data on the mean to median wealth ratio, tax sizes, property prices, homeownership rate, and economic freedom of 36 OECD member countries over the years 2000-2021 are used to execute various panel regressions with two-way fixed effects. Although not finding a significant relationship between the sizes of different taxes and wealth inequality, the results show that changes in property prices have a statistically significant effect on wealth distribution. Moreover, this effect varies depending on the homeownership rate of a country. In countries with a homeownership rate of more than 75.8 percent, increasing property prices seems to have a wealth equalising effect while the effect is the opposite for countries with lower homeownership rates. Hence, national policy decisions regarding property prices and wealth inequality should take homeownership rate into consideration. Assuming that low wealth inequality and a fair tax design is desirable, a policy recommendation is made for Sweden. Based on previous research and theory, we suggest reimplementing a progressive or proportional recurrent tax on immovable property. Based on the results of this paper we suggest removing tax deductions for interest rates and centralising decision making on housing construction. Due to the lack of empirical evidence, the validity of the policy suggestion for a reintroduction of recurrent tax on immovable property is weakened. Thus, further research is needed to examine if there is a relationship between recurrent property tax and wealth distribution.}},
author = {{Fröderberg, Emil and Björk, Erik}},
language = {{eng}},
note = {{Student Paper}},
title = {{Property Taxes, Property Prices and Wealth Inequality: The role of recurrent property tax in the interaction between wealth inequality, property prices and homeownership rate with a special focus on Sweden.}},
year = {{2024}},
}