New Evidence of the Effect of Transaction Costs on Residential Mobility

22 Pages Posted: 9 Nov 2005

Abstract

Transaction costs have attracted considerable attention in the theoretical literature on residential mobility. Transaction costs are thought to cause suboptimal consumption of housing but may also negatively affect labor market outcomes. In the current paper, we demonstrate empirically for the Netherlands that transaction costs have a strong negative effect on the owners' probability of moving. Under a range of different specifications, it appears that a 1 percent-point increase in the value of transaction costs - as a percentage of the value of the residence - decreases residential mobility rates by (at least) 8 percent. The estimates imply that ownership to ownership mobility rates would be substantially higher in the absence of the current 6 percent ad valorem buyer transaction tax. Our estimates are consistent with the observation that in the Netherlands ad valorem transaction costs mainly consist of buyer transaction costs.

Suggested Citation

van Ommeren, Jos and van Leuvensteijn, Michiel, New Evidence of the Effect of Transaction Costs on Residential Mobility. Journal of Regional Science, Vol. 45, No. 4, pp. 681-702, November 2005, Available at SSRN: https://ssrn.com/abstract=830164

Jos Van Ommeren (Contact Author)

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

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