Property Tax and Housing Returns

This paper evaluates the effects of property tax on housing. While land tax and capital gains tax are widely used for curbing hoarding of land and speculation, its effectiveness is inconclusive. The imposition of a capital gains tax will impair the liquidity of property transaction, lower the rate of return on property investment, and reduce revenue from land sales which represents an important tax resource for the communities. This paper shows that a capital gains tax is capitalized into housing prices. Individuals tend to postpone the purchase of houses because of transaction taxes. Using an impulse response function, we show that a transaction tax has a dynamic negative impact on housing returns. While this paper focuses on Hong kong, for the purpose of comparison Singapore and Taiwan are also discussed.     

“其他综合收益”实务应用及披露

为了与修订后的国际列报准则《国际会计准则第1号——财务报表列报》趋同,我国于2009年6月11日通过发布《企业会计准则解释第3号》对财务报表列报提出新要求,其中第七条对利润表的列报内容和方式做出了适当调整,在利润表中增加"其他综合收益"和"综合收益总额"项目。"其他综合收益"反映企业根据企业会计准则规定未在损益中确认的直接计入所有者权益的各项利得和损失扣除所得税影响后的净额,"综合收益总额"反映企业净利润与其他综合收益的合计金额。但是,在企业会计准则解释第3号中,并没有规定其他综合收益的具体内容,这给实践中的上市公司带来了困扰。本文在区分"资本公积——其他资本公积"和"其他综合收益"的基础上,梳理了其他综合收益的核算内容,期望能为实务工作提供理论指导。     

Self-selection and intermunicipal migration in Canada

"This paper investigates individual intermunicipal migration behaviour in Canada within the context of a human capital model that adjusts for the migrant's selectivity in computing expected income gains. In addition to the typical regional determinants of migration, housing and labour market characteristics are found to influence intermunicipal migration significantly, the effects differing with age. Structural coefficients remained more or less stable during the decade 1971-1981. It is shown that the failure to adjust income gains for selectivity bias results in an underestimation of the migration-impacts of income gains and municipal-specific factors."     

Owner-occupied housing in a model of exchange rate determination

This study explores the effect of owner-occupied housing asset holdings on the short and long run determination of exchange rates. In the presence of consumption goods that can simultaneously serve as investment allocation subject to capital gains—such as owner-occupied housing—the general equilibrium model, based on the Obstfeld and Rogoff Redux model, produces exchange rate overshooting both in the presence and in the absence of price rigidities in the markets for final goods. This effect depends on the size of owner-occupied housing expenditures relative to total consumption expenditures, the initial level of housing market inflation, capital gains in housing and other parameters of the model. Depending on parameter values and initial conditions, the model supports the possibility for exchange rate dynamics that include either overshooting or undershooting.     

Household wealth accumulation and portfolio choices in Korea

This paper constructs a quantitative lifecycle model with uninsurable labor income and housing return risk to investigate how Korean households make saving and portfolio decisions. The model not only incorporates the special roles housing plays in the portfolio of households: collateral, a source of service flows, as well as a source of potential capital gains or losses, but also adds to existing models of wealth accumulation some unique institutional features present in Korea, namely the rental system (‘chonsae’) and the lack of a mortgage system. When the model is calibrated to match the Korean economy, several key features of the data are better able to be reproduced. The paper also analyzes the role of institutional features by comparing several alternative housing market arrangements to assess their impact on wealth accumulation, portfolio choices, and homeownership. A 10 percentage points reduction in down-payment requirement is associated with approximately 1 percentage point increase in the aggregate homeownership ratio in Korea. Lower down-payment also increases the fraction of aggregate wealth held in housing assets but lowers aggregate net worth with mixed demographic implications.     

House prices and consumer welfare

We develop a new approach to measuring changes in consumer welfare due to changes in the price of owner-occupied housing. In our approach, an agent's welfare adjustment is defined as the transfer required to keep expected discounted utility constant given a change in current house prices. We demonstrate that, up to a first-order approximation, there is no aggregate change in welfare due to price increases in the existing housing stock. This follows from a simple market clearing condition where capital gains experienced by sellers are exactly offset by welfare losses to buyers. We show that this result holds (approximately) even in a model that accounts for changes in consumption and investment plans prompted by current house price changes. There can, however, be changes in welfare due to additions to the stock of housing, or to changes in the price of renovating and upgrading the existing stock of housing. For the United States, we estimate the welfare cost of house price appreciation to be an average of $127 per household per year over the 1984–1998 period.     

Corporate income tax and futures hedging

Our research is motivated by the Corn Products vs. Arkansas Best Supreme Court decisions that pitched the controversy of the tax treatment of gains and losses from futures hedging. The use of futures contracts as risk management tools depends on the tax code. In this paper we address complications in the current tax code that allow for asymmetric offset: Ordinary losses can be applied against capital gains; however, capital losses cannot by applied against ordinary gains. Also we consider the issue of tax loss carryover. We investigate the optimal hedge ratios under these scenarios analytically where possible, and numerically where necessary. Michael Metz is an independent commodity market consultant.     

The motherhood wage gap: What about job amenities?

Women with children tend to earn lower hourly wages than women without children — a shortfall known as the ‘motherhood wage gap’. While many studies provide evidence for this empirical fact and explore several hypotheses about its causes, the impact of motherhood on job dimensions other than wages has scarcely been investigated. In order to assess changes in women's jobs around motherhood, I use data from the German Socio-Economic Panel and employ a first difference analysis. The results reveal that women when having children accommodate at their original employer primarily through adjustments in working hours. Yet, when changing the employer women adjust their jobs in several dimensions, such as different aspects of the work schedule (working hours, work at night or according to a flexible schedule) as well as the level of stress. Further analysis provides some limited support for the motherhood wage gap being explained by adjustments in the work conditions.     

Human capital mobility patterns in the European Union and the financial crisis

This paper provides new evidence on the quantification of economic losses and/or gains from skilled human capital mobility in terms of GDP and productivity in several EU countries during and after the Great Recession. We construct two novel indicators to quantify and compare the economic effects of human capital mobility across EU countries in 2008, 2012, and 2016. Through hierarchical clustering, we created groups of countries to perform a non-parametric MANOVA. The results suggest the existence of three groups of countries aggregated by similar economic and mobility patterns. The differences between these groups are significant and allow us to delineate the countries’ gains and losses.

     

Restriction of Farm Ownership as Rent-seeking Behavior: Family Farmers Have It Their Way

A bstract . Restriction of foreign ownership of U.S. farmland has an obvious cost of foregone capital gains to farmers Yet their push to achieve state regulation of foreign investment in agricultural land has a sound economic basis. If required acreage expansion and high prices for land combine to force small, family farmers out of business, the value of their accumulated human capital falls precipitously, since it is soil specific With a large foreign demand for farmland which induces a tremendous rate of land price inflation , capital gains on their land swamp potential human capital losses. However, marginal participation in the U.S. farmland market by foreigners creates capital gains on land which are insufficient to compensate farmers for lost human capital, and creates a rationale for regulation The empirical results demonstrate that the pattern of legislative restrictions against foreign ownership of farmland is a function of the relative political power wielded by family farmers.     

Risky bank lending and countercyclical capital buffers

We study the properties of a monetary economy with an essential role for risky bank lending. Banks issue deposits and lend to entrepreneurs. Because banks׳ lending rate cannot be made contingent on aggregate shocks, and because banks face capital adequacy regulations, they require a capital buffer against loan losses. Capital adequacy regulations are modeled on the Basel-III rules, including a minimum capital adequacy ratio, an endogenous capital conservation buffer, and a countercyclical capital buffer. We find that a countercyclical capital buffer leads to a significant increase in welfare. It also reduces the need for countercyclical adjustments in policy interest rates.     

Housing as an asset and the effects of property taxation on the residential development process

A model of residential development is constructed recognizing the asset side of land and housing. The equilibrium process is characterized under the perfect foresight assumption, and the effects of a capital gains tax (both unanticipated and anticipated) and a tax on property values are examined.     

Sooner or Later? – Paradoxical Investment Effects of Capital Gains Taxation under Simultaneous Investment and Abandonment Flexibility

This paper analyzes the impact of capital gains taxation on investment timing decisions for risky investment projects with entry and exit flexibility under differential tax rates for ordinary income and capital gains. We investigate whether capital gains taxation influences immediate and delayed investments asymmetrically, given the optimal abandonment decision. If capital gains taxation induces a lock-in effect, this effect is anticipated in the investment timing decision. In contrast to prior research, our numerical simulations show that this lock-in effect of capital gains taxation can induce normal as well as paradoxical effects on investment timing under simultaneous entry and exit flexibility. A paradoxical timing effect, i.e., investment accelerated by capital gains taxation, especially emerges for high liquidation proceeds or, more conservative tax accounting, low interest rates, and low volatilities. In these cases, capital gains taxation reduces the value of the option to invest and hereby increases the propensity to invest immediately. As a second paradoxical tax effect, capital gains taxation may favor delayed real investment over financial investment. Facing these results, tax legislators should not use capital gains taxation as a short-term tax policy instrument to influence investors' timing decisions.     

An adjustment cost model of long-term employment in Japan

A dynamic factor demand model is presented which pays special attention to the prevalence of a long-term employment relationship in Japan. The model is based on the representation of technology by a variable cost function with adjustment costs for employment and capital stock, where the variable cost consists of the sum of overtime costs and materials costs. With employment being quasi-fixed and scheduled hours institutionally regulated, short-run adjustments are mostly made by overtime hours. Application to a time-series data on the Japanese electrical machinery industry indicates quasi-fixity of capital and employment and reproduces short-run overshooting of overtime hours to compensate for the sluggish adjustment of employment.     

Rising wage inequality,the decline of collective bargaining,and the gender wage gap

This paper investigates the increase in wage inequality, the decline in collective bargaining, and the evolution of the gender wage gap in West Germany between 2001 and 2006. Based on detailed linked employer–employee data, we show that wage inequality is rising strongly — driven not only by real wage increases at the top of the wage distribution, but also by real wage losses below the median. Coverage by collective wage bargaining plummets by 16.5 (19.1) percentage points for male (female) employees. Despite these changes, the gender wage gap remains almost constant, with some small gains for women at the bottom and at the top of the wage distribution. A sequential decomposition analysis using quantile regression shows that all workplace related effects (firm effects and bargaining effects) and coefficients for personal characteristics contribute strongly to the rise in wage inequality. Among these, the firm coefficients effect dominates, which is almost exclusively driven by wage differences within and between different industries. Labor demand or firm wage policy related effects contribute to an increase in the gender wage gap. Personal characteristics tend to reduce wage inequality for both males and females, as well as the gender wage gap.     

Diagnosing housing fever with an econometric thermometer

Housing fever is a popular term to describe an overheated housing market or housing price bubble. Like other financial asset bubbles, housing fever can inflict harm on the real economy, as indeed the U.S. housing bubble did in the period following 2006 leading up to the general financial crisis and great recession. One contribution that econometricians can make to minimize the harm created by a housing bubble is to provide a quantitative “thermometer” for diagnosing ongoing housing fever. Early diagnosis can enable prompt and effective policy action that reduces long-term damage to the real economy. This paper provides a selective review of the relevant literature on econometric methods for identifying housing bubbles together with some new methods of research and an empirical application. We first present a technical definition of a housing bubble that facilitates empirical work and discuss significant difficulties encountered in practical work and the solutions that have been proposed in the past literature. A major challenge in all econometric identification procedures is to assess prices in relation to fundamentals, which requires measurement of fundamentals. One solution to address this challenge is to estimate the fundamental component from an underlying structural relationship involving measurable variables. A second aim of the paper is to improve the estimation accuracy of fundamentals by means of an easy-to-implement reduced-form approach. Since many of the relevant variables that determine fundamentals are nonstationary and interdependent we use the endogenous instrumental variable based method (IVX) to estimate the reduced-form model to reduce the finite sample bias which arises from highly persistent regressors and endogeneity. The recursive evolving test proposed by Phillips, Shi, and Yu (PSY) is applied to the estimated nonfundamental component for the identification of speculative bubbles. The new bubble test developed here is referred to as PSY-IVX. An empirical application to the eight Australian capital city housing markets over the period 1999–2017 shows that bubble testing results are sensitive to different ways of controlling for fundamentals and highlights the importance of accurate estimation of these housing market fundamentals.     

Stock volatility and trading

Both, rational and behavioral models predict that stock and market volatility affect trading by investors. Tax-induced trading hypothesis predicts that investors increase realization of capital losses short term and capital gains only long term as volatility increases. Behavioral models predict that disposition biases of holding on to losers and disposing of winners intensifies with volatility. We document that market and stock volatility influence stock trading. Evidence on trading in response to rise in market volatility supports tax-loss harvesting hypothesis – abnormal trading of losers increases and winners decreases. However, evidence on trading patterns conditional on individual stock volatility is in support of both tax-loss-harvesting and behavioral models: trading in both losing stocks (tax-loss-harvesting hypothesis) and winning stocks (disposition effect hypothesis) increases with rise in stock volatility.     

Estate Agents as Interpreters of Economic and Cultural Capital: The Gentrification Premium in the Sydney Housing Market

This article focuses on the role of real estate agents as interpreters of the relationship between housing aesthetics (taste) and price. The research includes an analysis of housing advertisements, observation of housing auctions, and interviews with real estate agents in the gentrified inner western suburbs of Sydney, Australia. Adapting the work of Pierre Bourdieu on social class, the article argues that the relationship between housing taste and price captures the interaction of cultural and economic capital and that the intermediary role of the estate agent can be used to explore this. It concludes that the gentrification aesthetic is dynamic and increasingly demands economic capital at the expense of cultural capital (a gentrification premium) to maintain class distinction. Cet article traite du rôle des agents immobiliers en tant qu'interprètes du lien entre l'esthétique (goût) et le prix d'un logement. L'étude couvre une analyse des annonces, une observation des ventes aux enchères, ainsi que des entretiens avec des agents immobiliers dans des banlieues embourgeoisées situées directement à la périphérie ouest de Sydney (Australie). En adaptant les travaux de Pierre Bourdieu sur les classes sociales, l'article établit que la relation goût‐prix du logement accapare l'interaction du capital culturel et économique, le rôle intermédiaire de l'agent immobilier permettant d'explorer celle‐ci. La conclusion démontre que l'esthétique de l'embourgeoisement est dynamique et exige un capital financier croissant au détriment du capital culturel (bonus de la réhabilitation) afin de préserver une distinction de classe.     

Revealed preference for relative status: Evidence from the housing market

This paper investigates the value individuals place on their relative housing consumption as compared to absolute housing consumption. Using observed housing sales from three Ohio MSAs in 2000, a spatial Durbin hedonic price model provides total marginal willingness-to-pay estimates for both characteristics of housing units and those of its neighbors. Using this revealed-preference approach, we find evidence suggesting individuals do value relative house size, but the absolute effect dominates. For instance, the estimates indicate that if all homes in Columbus were to increase in size by 100 square feet, the net effect of impacts on absolute and relative consumption would be to increase house prices by $605 on average. This stands in contrast to the stated preference literature, which frequently find individuals to be willing to forgo absolute well-being in exchange for relative status gains.     

The effect of widowhood on housing and location choices

The number of elderly persons living alone is increasing and their influence on the housing market is getting larger. This paper investigates the effect of the loss of a spouse on housing and location choices. A partner’s death induces a decrease in income which may lead to downsizing. Widowhood may also reveal new preferences, such as the need to be close to care givers and health services. We estimate the effect of a transition to widowhood on housing consumption and location choices using the French Housing Surveys. Widowhood significantly increases residential mobility, especially at older ages and for those who have children. Mobile widows tend to live closer to their relatives but do not move to co-reside with a child. Housing and location adjustments are consistent with new widows moving to dwellings that are smaller, more often apartments and in the rental sector, and on average located in larger municipalities where services are more accessible. The housing demand of widows will be significant in the next 20 years, especially the demand for small dwellings.