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How do Households Value the Future? Evidence from Property Taxes

Pinchbeck, E. ORCID: 0000-0002-5638-3923 and Koster, H. R. A. (2018). How do Households Value the Future? Evidence from Property Taxes ((18/06)). London, UK: Department of Economics, City University of London.

Abstract

Despite the near ubiquity of inter-temporal choice, there is little consensus on the rate at which individuals trade present and future costs and benefits. We contribute to this debate by estimating discount rates from extensive data on housing transactions and spatio-temporal variation in property taxes in England. Our findings imply longterm average discount rates that are between 3 and 4%. The close correspondence to prevailing market interest rates gives little reason to suggest that households misoptimise by materially undervaluing very long term financial flows in this high stakes context.

Publication Type: Monograph (Discussion Paper)
Additional Information: ©2018, the authors.
Publisher Keywords: housing, property taxes, discount rate, capitalisation rate, undervaluation
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics
School of Arts & Social Sciences > Economics > Discussion Paper Series
URI: https://openaccess.city.ac.uk/id/eprint/21346
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