Proposition 13: An Equilibrium Analysis

50 Pages Posted: 4 Aug 2015 Last revised: 21 Feb 2017

See all articles by Ayse Imrohoroglu

Ayse Imrohoroglu

University of Southern California - Marshall School of Business

Kyle Matoba

University of California, Los Angeles (UCLA) - Anderson School of Management

Selale Tuzel

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: September 28, 2016

Abstract

There are many federal, state, and local laws that distort housing decisions and prices. However, it is often difficult to tease out the quantitative impact of such policies. In this paper, we examine the implications of one of the most significant tax changes initiated by voters in the United States on house prices, housing turnover, and household welfare. In 1978 California passed Proposition 13, which lowered property tax rates and restricted future property tax increases. We find that, the introduction of Proposition 13 leads to a 15% increase in house prices and a 3.3% decrease in the moving rates. The elimination of Proposition 13, however, leads to modest changes in house prices and mobility but sizable welfare gains.

Keywords: Proposition 13, Property tax, Housing, House Prices

JEL Classification: E62, R31, R21, H2, H71

Suggested Citation

Imrohoroglu, Ayse and Matoba, Kyle and Tuzel, Selale, Proposition 13: An Equilibrium Analysis (September 28, 2016). Marshall School of Business Working Paper No. 17-5, Available at SSRN: https://ssrn.com/abstract=2639056 or http://dx.doi.org/10.2139/ssrn.2639056

Ayse Imrohoroglu

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States
213-740-6518 (Phone)
213-740-6650 (Fax)

Kyle Matoba

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Selale Tuzel (Contact Author)

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

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