Research

Abstract: Despite its theoretical merits, Land Value Taxation (LVT) is not a common policy instrument. One of the main reasons is uncertainty regarding its distributional impacts. Using a general equilibrium model with heterogeneous agents calibrated to an unique household level dataset of German homeowners in 2017, we assess the distributional effects of replacing a housing tax with a LVT. Our data shows the share of land value in property value of 33%, on average, with considerable household heterogeneity, both within and across regions, and within income levels. Land values are more concentrated than property values, but, within regions, not as strongly correlated with income, making it less progressive than a standard property tax for homeowners. Results from the model show the introduction of a LVT increases residential investment substantially, reducing housing rents and benefiting renters. It also leads to migration from urban regions, promoting regional convergence. Landowners with high land holdings lose, in general, but most other landowners across income levels benefit, especially in non-urban regions. Overall, introduction of a LVT increases welfare, despite a minor regressive tendency in urban regions for homeowners.

Abstract: Despite high debt levels by the households and firms, macroeconomic models of financial accelerators have mostly ignored spillovers of borrowing decisions between these sectors. This paper presents a theoretical model to investigate the consequences joint household and firm borrowing for macroeconomic stability in a small open economy setting. In the model, households borrow from international markets against the collateral, land, which households rent to domestic firms to use as an input in the production of housing. Housing firms also borrow from international markets to finance a fixed share of costs. This creates a mechanism consisting of a positive feedback loop between household and firm borrowing which amplifies standard financial accelerator effects, a credit spiral. Similarly to standard financial accelerator models, an initial negative shock leads to decreases in the price of collateral which tightens the borrowing constraints. Household borrowing decreases not just because the value of its collateral decreases, but also because firms' decreased borrowing capacity further depresses the price of land. This mechanism acts as an enhanced Fisherian debt deflation and is shown to be present in downturns when an initial negative shock leads households and firms to deleverage. Quantitatively, I find this credit spiral effect can lead to 40\% larger drops in household borrowing during sudden stop events, leading to sharper falls in consumption during financial crisis.

Abstract: The issue of land rents and their taxation through a land value tax (LVT) was as a hotly debated topic in economic theory since classical age of economics and until the early twentieth century, when it mostly vanished as a research subject. Today, land value taxation is still commonly endorsed in principle by renowned economists as a desirable fiscal instrument, but research remains scarce. I provide a brief history of the evolution of the concept of land value taxation in economic theory in order to understand the reasons why it fell out of favor as a research subject in the literature. I argue this outcome was driven by developments both inside and outside academia. Within academia, more than the explicit attempts to oppose land value taxation, the most crucial development was the emergence of the conceptualization of a dual input theory of economics, where land was indistinguishable from other types of capital. Outside academia, the social and political context of the fiercely ideological twentieth century helped suppress research into taxation of land values, an idea which possessed some socialist connotations.