When statutory incidence matters: Evidence from the German market for real estate agents

47 Pages Posted: 20 Oct 2023

See all articles by Jörg Claussen

Jörg Claussen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management); Copenhagen Business School - Department of Innovation and Organizational Economics

Katerina Dubovska

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

David Streich

Catholic University of Eichstaett-Ingolstadt - Ingolstadt School of Management

Date Written: October 2023

Abstract

Liability-side equivalence suggests that the statutory incidence of a fee (the side of a transaction physically transmitting the fee) is independent of its economic incidence (the side bearing the economic burden of the fee). We test this conjecture empirically by examining the effect of a policy intervention in the German market for real estate agents, which partially shifted the statutory incidence of commissions from buyers to sellers with the intent of economically relieving buyers. Specifically, we study listings posted on online real estate marketplaces two months before and after the policy implementation date. To identify causal effects, we employ a difference-in-differences estimation using two treatment specifications and one Placebo specification. Our results suggest that statutory incidence affects economic incidence, as purchase prices (including commission) decreased significantly following the rule change. This indicates that - contrary to economic theory - sellers were unable to pass on their additional statutory burden to buyers. Further, we find that sellers were particularly affected by increased costs in counties in which they had less market power. In response to the higher cost, sellers reduced demand for brokerage, in particular for lower-priced objects. Our findings have important implications for the distribution of statutory incidence of intermediary fees in matching markets and tax liability considerations.

Keywords: statutory incidence, liability-side equivalence, intermediary fees, matching markets, real estate brokerage

JEL Classification: H22, R38

Suggested Citation

Claussen, Jörg and Dubovska, Katerina and Streich, David, When statutory incidence matters: Evidence from the German market for real estate agents (October 2023). Available at SSRN: https://ssrn.com/abstract=4606127 or http://dx.doi.org/10.2139/ssrn.4606127

Jörg Claussen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Copenhagen Business School - Department of Innovation and Organizational Economics ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Katerina Dubovska

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

David Streich (Contact Author)

Catholic University of Eichstaett-Ingolstadt - Ingolstadt School of Management ( email )

Finance and Banking Department
Catholic University of Eichstaett-Ingolstadt
Ingolstadt, 85049
Germany

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