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Public Service Capitalization and Real Property Value:The Case for a Local Property Tax in China

【Authors】
REN Qiang, HOU Yilin & MA Haitao
【WorkUnit】
REN Qiang (Central University of Economics and Fiance)
HOU Yilin (Syracuse University)
MA Haitao(Central University of Economics and Fiance)
【Abstract】

There has yet no thorough empirical research about why China should levy a broadbase real property tax. We try to fill the niche in the literature from the perspective of value capture of public service via real property price, using data of second-hand housing in Beijing and reputation of elementary schools that match these homes. Results show that the unit housing price in Tier I school attendance zones is 30% higher than that in Tier III zones. We also use the mid-2014 strictly implemented “attendance by proximity” policy as a shock to empirically test its outcome. Results show that housing price in Tier-II school zones increased by 5% with the policy shock. We take these results as evidence to advocate for levying a broad-base property tax in China in order to capture the capitalized value arising from improved public services.

JEL:H2,I2,R5

【KeyWords】
Public Service,Capitalization,Housing Price,School Attendance by Proximity,Real Property Tax