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Housing and the Macroeconomy: What Role for Taxation?

Awarded: NOK 1.0 mill.

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2008 - 2009

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We establish a full hedonic house price model for Norway and employ the model to impute the implicit income/consumption-stream owner-occupiers receive from their homes. and utilize the imputations to establish an overview of the full tax base in Norway, i ncluding labor income, capital income, and own-house income. These computations complete the tax base, which lets us estimate the revenue losses of not taxing the advantage of owner-occupied housing and to calculate potential reductions in deadweight loss es in the event that policymakers substitute; in a revenue-neutral fashion; taxes on labor income with taxes on owner-occupied housing with Dag Einar Sommervoll). In a second stage, I estimate the Engel/income elasticity for owner-occupied housing consump tion for Norway in the period 2000-2007 and employ estimates to examine whether taxation of owner-occupied housing constitutes a progressive taxation scheme. Then, I compute inequality metrics for i) distribution of income and for ii) distribution of inco me plus housing income, in order to examine the inequality source of housing. This allows comparison between estimates in earlier stages in order to investigate whether a revenue-neutral substitution from taxation on labor income to taxation on owner-occu pied housing creates a more progressive taxation scheme. The project proceeds to inspect cohort-effects and uncover whether there are significant wealth-differences between otherwise identical population cohorts over the lifetime.

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