Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: May, 2024, Volume 15, Issue 2

Stamping Out Stamp Duty: Housing Mismatch and Welfare

p. 381-426

Yunho Cho, Shuyun May Li, Lawrence Uren

Property transaction taxes—also known as stamp duty—are widely viewed as an inefficient form of taxation. In this paper, we examine the welfare implications of removing stamp duty in a general equilibrium overlapping generation model with heterogeneous agents. Our model features an idiosyncratic shock to housing preferences, which may create mismatch or induce households to move. We calibrate the model to the Australian housing market, and conduct counterfactual policy experiments where stamp duty is replaced with recurrent property or consumption taxes. We find that removing stamp duty raises household mobility and reduces the degree of housing mismatch substantially. When examining steady states, we find that newborn households prefer entering an economy with a recurring property tax rather than one with stamp duty. In contrast, when examining the transition we find that existing households prefer replacing stamp duty with a consumption tax.

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Supplemental Material

Supplement to "Stamping Out Stamp Duty: Housing Mismatch and Welfare"

Yunho Cho, Shuyun May Li and Lawrence Uren

This supplemental appendix contains material not found witnin the manuscript.

Supplement to "Stamping Out Stamp Duty: Housing Mismatch and Welfare"

Yunho Cho, Shuyun May Li and Lawrence Uren

The replication package for this paper is available at https://doi.org/10.5281/zenodo.10440470. The authors were granted an exemption to publish parts of their data because either access to these data is restricted or the authors do not have the right to republish them. However, the authors included in the package, on top of the codes and the parts of the data that are not subject to the exemption, a simulated or synthetic dataset that allows running the codes. The Journal checked the data and the codes for their ability to generate all tables and figures in the paper and approved online appendices. Whenever the available data allowed, the Journal also checked for their ability to reproduce the results. However, the synthetic/simulated data are not designed to produce the same results.