The Effects of Taxes, Inflation and Government Effectiveness on House Real Price in OECD Countries: A Panel Data Study

Abstract

This study aims to investigate the relationship between income tax (TPI), goods and services tax (TGS) and property tax (TOP) on real house price (HRP). On the other hand, this study examines the impact of inflation and government effectiveness (GE) on HRP. As far as I know, there are few studies in the literature that have examined these relationships. There is also no study that has examined the relationship between inflation and GE as economic variables on HRP. This study is quantitative, and the research design used is panel data. This study collects data from the OECD database for 49 OECD countries from 2000 to 2019. Two estimation methods, namely Ordinary Least Square (OLS) and LSDVC, are used in this study to minimize measurement error and test five hypotheses. Since LSDVC is more suitable to solve dynamic association, endogeneity and autocorrelation problems, this study considers LSDVC results as the main result of this study. Thus, by using LSDVC, this study found only a negative relationship between GE and HRP and no relationship between taxes, inflation and HRP. This study aims to contribute to the findings of previous studies. In addition to theoretical and methodological contributions, the results of this study are useful for OECD developed and developing countries to understand the impact of various taxes, GE and inflation on HRP. The results may also provide important guidance to policy makers in developing countries who are considering the application of various types of taxes.