My sense is that moving houses incurs a cost proportional to the value of the house, if only because real estate agents typically charge a percentage fee instead of a flat fee. That seems tied to decreased migration, to me; it’s already well-studied that increased frictional costs to buying and selling a home in California from prop 13 leads to decreased migration.
It seems likely that this extends to the economy at large: as local knowledge and reputation (and other ‘intangibles’) become more important, the costs to moving increase. Yelp reviews tied to a particular location presumably make it more difficult to move a restaurant than it was 30 years ago, even as internet search makes it more possible for new businesses to be discovered. It seems likely that it was historically much easier to sell companies without retaining core staff, as the primary value of the company was in capital it owned; compare to a company now whose primary value is in intangibles or the human capital of particular employees.
The other story in decreased interstate migration is increased intercountry migration; wage differences between states drive movements between those states, but someone entering the country from outside is much more indifferent between states than someone who already has a home and job and social connections in a particular state. Sufficient migration to prevent those wage differences from getting high enough to overcome the energetic barrier of switching costs means fewer people move. But this isn’t obviously bad, and I bring it up mostly as part of a “what’s up with decreased migration, as a component of decreased dynamism?”
My experience moving is that the annoyance cost of moving—prioritization, search, negotiation, moving and changing your stuff, relearning your surroundings, making new friends, dealing with the kids, and so forth—towers over things like real estate commissions, even if you own a relatively expensive house, especially now that the internet is (finally!) driving them down. When recently considering a move, at first I thought the round-trip commission cost was an issue until I realized it was missing a zero versus other concerns.
In the UK, there is a tax payable any time you buy a house, called “stamp duty land tax”. E.g., if you buy a house costing £500,000 then you get taxed £15,000. This is a lot bigger than typical agents’ fees. But this may be a UK idiosyncrasy without parallels anywhere else—I’m pretty sure there’s no such thing in the US, for instance.
In the UK, there is a tax payable any time you buy a house, called “stamp duty land tax”. E.g., if you buy a house costing £500,000 then you get taxed £15,000. This is a lot bigger than typical agents’ fees. But this may be a UK idiosyncrasy without parallels anywhere else—I’m pretty sure there’s no such thing in the US, for instance.
Prop 13 in California has vaguely similar consequences—property taxes are paid annually as a percentage of the assessed value of the property, but Prop 13 limits the assessed value of the property to grow by 2% per year at most, unless the property is sold, at which point the assessed value becomes the sale price. (The annual increase in median home price over that period has been closer to 8%.) Implicitly, this is a tax on selling homes that becomes larger the longer the house has been owned by a single party.
My sense is that moving houses incurs a cost proportional to the value of the house, if only because real estate agents typically charge a percentage fee instead of a flat fee. That seems tied to decreased migration, to me; it’s already well-studied that increased frictional costs to buying and selling a home in California from prop 13 leads to decreased migration.
It seems likely that this extends to the economy at large: as local knowledge and reputation (and other ‘intangibles’) become more important, the costs to moving increase. Yelp reviews tied to a particular location presumably make it more difficult to move a restaurant than it was 30 years ago, even as internet search makes it more possible for new businesses to be discovered. It seems likely that it was historically much easier to sell companies without retaining core staff, as the primary value of the company was in capital it owned; compare to a company now whose primary value is in intangibles or the human capital of particular employees.
The other story in decreased interstate migration is increased intercountry migration; wage differences between states drive movements between those states, but someone entering the country from outside is much more indifferent between states than someone who already has a home and job and social connections in a particular state. Sufficient migration to prevent those wage differences from getting high enough to overcome the energetic barrier of switching costs means fewer people move. But this isn’t obviously bad, and I bring it up mostly as part of a “what’s up with decreased migration, as a component of decreased dynamism?”
My experience moving is that the annoyance cost of moving—prioritization, search, negotiation, moving and changing your stuff, relearning your surroundings, making new friends, dealing with the kids, and so forth—towers over things like real estate commissions, even if you own a relatively expensive house, especially now that the internet is (finally!) driving them down. When recently considering a move, at first I thought the round-trip commission cost was an issue until I realized it was missing a zero versus other concerns.
In the UK, there is a tax payable any time you buy a house, called “stamp duty land tax”. E.g., if you buy a house costing £500,000 then you get taxed £15,000. This is a lot bigger than typical agents’ fees. But this may be a UK idiosyncrasy without parallels anywhere else—I’m pretty sure there’s no such thing in the US, for instance.
Prop 13 in California has vaguely similar consequences—property taxes are paid annually as a percentage of the assessed value of the property, but Prop 13 limits the assessed value of the property to grow by 2% per year at most, unless the property is sold, at which point the assessed value becomes the sale price. (The annual increase in median home price over that period has been closer to 8%.) Implicitly, this is a tax on selling homes that becomes larger the longer the house has been owned by a single party.