Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215452
Authors: 
Grodecka, Anna
Hull, Isaiah
Year of Publication: 
2019
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 374
Abstract: 
Attempts to measure the capitalization of local taxes into property prices, starting with Oates (1969), have suffered from a lack of local public service controls. We revisit this vast literature with a novel dataset of 947 time-varying local characteristic and public service controls for all municipalities in Sweden over the 2010-2016 period. To make use of the high dimensional vector of controls, as well as time and geographic fixed effects, we employ a novel empirical approach that modifies the recently-introduced debiased machine learning estimator by coupling it with a deep-wide neural network. We find that existing estimates of tax capitalization in the literature, including quasi-experimental work, may understate the impact of taxes on house prices by as much as 50%. We also exploit the unique features of our dataset to test core assumptions of the Tiebout hypothesis and to estimate the impact of public services, education, and crime on house prices.
Subjects: 
Local Public Goods
Tax Capitalization
Tiebout Hypothesis
Machine Learning
Property Prices
JEL: 
C45
C55
H31
H41
R3
Document Type: 
Working Paper

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