How Do Households Value the Future? Evidence from Property Taxes
American Economic Journal: Economic Policy
vol. 14,
no. 1, February 2022
(pp. 207-39)
Abstract
Despite the near ubiquity of intertemporal 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 spatiotemporal variation in property taxes in England. Our findings imply long-term average net of growth nominal discount rates that are between 3 and 4 percent. The close correspondence to prevailing market interest rates gives little reason to suggest that households misoptimize by materially undervaluing very long-term financial flows in this high-stakes context.Citation
Koster, Hans R.A., and Edward W. Pinchbeck. 2022. "How Do Households Value the Future? Evidence from Property Taxes." American Economic Journal: Economic Policy, 14 (1): 207-39. DOI: 10.1257/pol.20200443Additional Materials
JEL Classification
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- H71 State and Local Taxation, Subsidies, and Revenue
- R31 Housing Supply and Markets
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