Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/308286 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] International Tax and Public Finance [ISSN:] 1573-6970 [Volume:] 30 [Issue:] 1 [Publisher:] Springer US [Place:] New York, NY [Year:] 2022 [Pages:] 215-246
Publisher: 
Springer US, New York, NY
Abstract: 
This paper assesses to which degree housing purchase subsidies are capitalized into property prices. Using a large-scale micro-dataset on German house prices, I exploit the introduction of a new subsidy scheme in the state of Bavaria. My difference-in-difference estimations at the Bavarian interstate border indicate that the prices of single-family homes increased by approximately 10,000 euros more in Bavarian border regions. This is consistent with a full capitalization of the subsidy. No effect is found for apartments, whose purchasers seldom qualify for the subsidy. A heterogeneity analysis confirms that the price effect is larger in segments of the real estate market with a higher exposure to the subsidy scheme. I also provide suggestive evidence that the subsidy scheme slightly stimulated construction activity. Overall, my results indicate that instead of making house purchases more affordable for families, the subsidy scheme led to a rise in house prices and mainly benefited sellers of properties.
Subjects: 
Real estate market
Housing subsidies
Capitalization of subsidies
Property prices
JEL: 
H22
H24
H71
R31
R38
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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