The Impact of Local Taxes and Public Services on Property Values

Research output: Working paper


Attempts to measure the capitalization of local taxes into property prices, starting with Oates (1969), have suffered from a lack of local public service controls. We revisit this vast literature with a novel dataset of 947 time-varying local characteristic and public service controls for all municipalities in Sweden over the 2010-2016 period. To make use of the high dimensional vector of controls, as well as time and geographic fixed effects, we employ a novel empirical approach that modifies the recently-introduced debiased machine learning estimator by coupling it with a deep-wide neural network. We find that existing estimates of tax capitalization in the literature, including quasi-experimental work, may understate the impact of taxes on house prices by as much as 50%. We also exploit the unique features of our dataset to test core assumptions of the Tiebout hypothesis and to estimate the impact of public services, education, and crime on house prices.


External organisations
  • Sveriges Riksbank
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics


  • Local Public Goods, Tax Capitalization, Tiebout Hypothesis, Machine Learning, Property Prices
Original languageEnglish
PublisherSveriges Riksbank
Number of pages40
Publication statusPublished - 2019 May 2
Publication categoryResearch

Publication series

NameSveriges Riksbank Working Paper Series
PublisherSveriges Riksbank