The effect of property taxes on house prices: Evidence from the 1993 and the 2012 reforms in Italy

25 Pages Posted: 24 Sep 2021

See all articles by Melisso Boschi

Melisso Boschi

Senate of the Republic of Italy; Centre for Applied Macroeconomic Analysis (CAMA)

Valeria Bevilacqua

Senate of the Republic of Italy

Carla Di Falco

Senate of the Republic of Italy

Date Written: September 23, 2021

Abstract

We quantify the effect of property tax reforms implemented in Italy in 1993 and 2012 on property prices. We focus on the Italian house prices index using the Interrupted Time Series Analysis (ITSA), a statistical approach that proves to be useful when a counterfactual scenario for policy evaluation is difficult to create due to the universality of intervention. The hypothesis under test is that the two reforms caused a statistically significant discontinuity in the house prices index dynamics. We estimate two alternative versions of the ITSA model ─ one including only Italy, and another one including also similar European countries as control terms (France, Germany, Spain, and the UK). Property tax changes effects are reform-specific. As for the 1993 reform effect on real house prices, we estimate a 13-14 percent decrease of the mean level and a 1 percentage points (p.p.) increase of the rate of growth. As for the 2012 reform, depending on the model chosen, we estimate a 3-5 percent decrease, or a 4 percent increase, in level, as well as a 3-4 p.p. decrease, or a 2 p.p. increase, of the rate of growth.

Keywords: Policy effect evaluation, Property tax, House prices, Property tax capitalization, Tax reforms, Interrupted Time Series Analysis

JEL Classification: C32, H20, R21, R31

Suggested Citation

Boschi, Melisso and Boschi, Melisso and Bevilacqua, Valeria and Di Falco, Carla, The effect of property taxes on house prices: Evidence from the 1993 and the 2012 reforms in Italy (September 23, 2021). CAMA Working Paper No. 82/2021, Available at SSRN: https://ssrn.com/abstract=3929147 or http://dx.doi.org/10.2139/ssrn.3929147

Melisso Boschi (Contact Author)

Senate of the Republic of Italy ( email )

Rome
Italy

Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Valeria Bevilacqua

Senate of the Republic of Italy ( email )

Carla Di Falco

Senate of the Republic of Italy ( email )

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