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an average yearly decline of 7.1% between the trimesters in which the LOEVT was promoted until the trimester it was repealed.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.