Stamp duty and household mobility: regression discontinuity evidence from the UK

We estimate the effect of the UK real estate transfer tax on household mobility using household level panel data. We exploit a discontinuity in the tax schedule as a quasiexperimental setting which allows us to isolate the impact of the stamp duty from other determinants of mobility. Our empirical strategy compares households with self-assessed house values on either sides of a cut-off value where stamp duty liabilities jump sharply while controlling for flexible but smooth functions of house values. We find that a higher stamp duty negatively affects a household’s propensity to move and the expectation that a move is imminent. Our results suggest that a £5,000 increase in the stamp duty reduces mobility by roughly 30 percent. We conclude that the UK stamp duty adversely affects the functioning of housing- and labor markets.