The tax wedge and repair and maintenance of houses

Abstract

We estimate relations for consumers’ demand for repair and maintenance of houses. Repair and maintenance services have close substitutes in the black economy and via do-it-yourself production. The tax wedge is included as an explanatory variable, since it is a measure of the price of paid and taxed services relative to services produced by black market or do-it-yourself activities. On Danish macroeconomic time series data large elasticities with respect to prices and the tax wedge are estimated. We estimate simple level equations and error correction models and test for cointegration.