The effect of increasing land value capture on the gross value added of the construction sector

ABSTRACT

This paper estimates the effect of an increase in land value tax related to capital gains on the gross value added (GVA) of the construction sector. Using synthetic control method, the results indicate that the GVA of the construction sector presented an average yearly decline of 7.1% between the trimesters in which the LOEVT was promoted until the trimester it was repealed. Placebo tests applied to other sectors, excluding the construction sector, validate our result.

KEYWORDS:

• Land value capture
• synthetic control method
• Ecuador
• construction sector

JEL CLASSIFICATION:

• C10
• H22
• R52

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

https://doi.10.6084/m9.figshare.9722804

Notes

¹ See Perdomo (2011); Bai, Li, and Ouyang (2014); Zheng and Zhang (2013).

² Indice de Confianza Empresarial (in Spanish), published by the Central Bank of Ecuador. This index is constructed by asking entrepreneurs about the perception of economic activity in four sectors: industry, commerce, construction, and services.