Reading between the taxes. The role of property taxes in the housing market under uncertainty
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Date
2024
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Abstract
This paper investigates the dual role of property taxes in Chile’s housing market as both a financial burden and a signal that mitigates information asymmetry. Using a sharp regression discontinuity design (RDD) focused on tax exemption thresholds, the study reveals that paying property taxes increases housing prices by approximately 7\% near the threshold, suggesting a departure from traditional capitalization theory. The analysis identifies a significant signaling effect, where property tax payments act as a third-party certification of quality, especially in markets with high price uncertainty. These findings highlight the broader implications of tax policies in shaping housing affordability and market transparency. Robustness checks and heterogeneity analyses confirm the reliability of these results, emphasizing the importance of considering asymmetric information and uncertainty in housing policy design.
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Tesis (Master in Economics)--Pontificia Universidad Católica de Chile, 2024