Housing and capital accumulation : on the role of taxes

Abstract

This master thesis studies the impact of preferential tax treatment of housing property on capital accumulation and household portfolio choices in a model economy which is calibrated to Norwegian data. The current the tax code gives incentives to the households for accumulating more housing asset compared with other financial assets, resulting in a higher house prices and lower capital stocks, than at social optimum. Numerical algorithms shows that an increase in property tax accompanied by a capital income tax reduction increases welfare substantially.