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Hou article on public service capitalization and real property value published in PF&TE

Nov 30, 2017

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

Qiang Ren, Yilin Hou & Haitao Ma

Public Finance and Trade Economics, November 2017

Yilin Hou headshot

Yilin Hou

Should China impose the property tax? Why? This paper attempted to use the data of capitalization of the basic education in the real estate market to capture the value of public services, promote research in this field and provide reference for related decision-making.

This paper took Haidian District of Beijing as a sample, selected three types of attendance zones of primary schools, and uses the data of a total of 5442 houses collected from the websites of real estate agencies in mid-2013, the end of 2013, mid-2014 and the end of 2014, and controlled a variety of factors for regression analysis.

It was found that the unit housing price in key attendance zones of the city and the district is 30 percent and 5 percent higher than that of attendance zones of ordinary primary schools. In 2014, Beijing launched the strictest school attendance by proximity without examinations in history. The regression analysis of the difference-in-difference (DID) method found that after the implementation of this policy, the housing price in the attendance zones where key schools of the district locate increased by nearly 3 percent. The result of this paper is a direct evidence of the capitalization of basic education in China, indicating the wide tax base of property tax as a value capture tool should be introduced in China.