Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 446: Capital Gains Taxation and Residential Mobility in Sweden

Per Lundborg and Per Skedinger ()
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Per Lundborg: Research Institute of Industrial Economics (IFN)
Per Skedinger: Research Institute of Industrial Economics (IFN)

Abstract: Theoretical studies have shown that capital gains taxes in the housing market may create lock-in effects but so far no empirical evidence has been presented regarding the size of these effects. For a panel of Swedish house owners in 1984-1990, we show that lock-in effects only appear for households with income reductions; the size of these lock-in effects crucially depends on the magnitude of the income loss. The theoretical model and features of the Swedish tax system imply that lock-in effects depend on the degree of mismatch in the current residence and whether the households buy up or by down.

Keywords: Capital Gains Taxes; Residential Mobility

JEL-codes: H20; R20

22 pages, November 1995

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