Document Type

Article

Language

eng

Format of Original

16 p.

Publication Date

9-2012

Publisher

Elsevier

Source Publication

Journal of Housing Economics

Source ISSN

1051-1377

Original Item ID

doi: 10.1016/j.jhe.2012.06.001

Abstract

This paper offers an empirical test of the effect of the mortgage interest deduction (MID) on both the extensive (own vs. rent) and intensive (size of home) housing purchase margins. Using state level differences in MID availability to identify, I examine this relationship using standard ordinary least squares, instrumental variables, regression discontinuity, and sample selection estimation techniques. I find the MID to be responsible for a 10.9–18.4% increase in the size of home purchased, but that no relationship exists between the MID and home ownership. These results imply an elasticity of home size with respect to changes in user cost between −1 and −1.4.

Comments

Accepted version. Journal of Housing Economics, Vol. 21, No. 3 (September, 2012): 195–210. DOI. Published under Creative Commons license Attribution-NonCommercial-NoDerivatives 4.0 International.

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