Housing, collateral constraints, and fiscal policy

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Date

2013-06-20

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Abstract

This paper studies the preferential tax treatment of housing that can be observed in many industrialized countries. It provides a rationale for it by means of an optimal taxation approach taking into account an important feature of housing, namely its usage as collateral. In a borrower-lender framework where private loans are assumed to be non-enforceable and have to be collateralized by housing, optimal fisscal policy should disburden constrained borrowers by subsidizing their housing.

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Collateral Constraints, Housing, Optimal Fiscal Policy

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