Real Estate Prices and the Importance of Bequest Taxation

40 Pages Posted: 16 Mar 2009

See all articles by Giorgio Bellettini

Giorgio Bellettini

University of Bologna - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Filippo Taddei

School of Advanced International Studies (SAIS) - The Johns Hopkins University

Date Written: March 2009

Abstract

Taxation of bequests and donations is an important determinant of real estate prices. We show that, ceteris paribus, a decrease in taxes on inter vivos donations and bequests brings about an increase in real estate prices. We provide a general equilibrium rationalization in the context of OLG economies featuring intergenerational altruism. This has relevant policy implications. We test the predictions of our theory employing a unique policy shock: the abolition of bequest and donation taxation that took place in Italy in 2001. Considering this policy shift provides the first evidence that a drastic reduction in bequest and donation taxation significantly increased real estate prices. Our estimates suggest that the 2001 abolition of taxation on bequests and donations alone led to an appreciation of residential real estate in excess of 10%.

Keywords: real estate prices, donations, bequest taxation

JEL Classification: E62, H30

Suggested Citation

Bellettini, Giorgio and Taddei, Filippo, Real Estate Prices and the Importance of Bequest Taxation (March 2009). CESifo Working Paper Series No. 2577, Available at SSRN: https://ssrn.com/abstract=1360657 or http://dx.doi.org/10.2139/ssrn.1360657

Giorgio Bellettini (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
I-40126 Bologna
Italy
+39 051 2098136 (Phone)
+39 051 2098040 (Fax)

HOME PAGE: http://sites.google.com/site/giorgiobellettiniwebpage/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Filippo Taddei

School of Advanced International Studies (SAIS) - The Johns Hopkins University ( email )

via Andreatta, 3
Bologna, Bologna
Italy

HOME PAGE: http://https://www.sais-jhu.edu/filippo-taddei

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