DP5345 Property Tax and Urban Sprawl. Theory and Implications for U.S. Cities

Author(s): Yan Song, Yves Zenou
Publication Date: November 2005
Keyword(s): fully-closed city, instrumental variables, property tax, urban economics, urban sprawl
JEL(s): H3, H71, R14
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5345

This article attempts a formal analysis of the connection between property tax and urban sprawl in U.S. cities. We develop a theoretical model that includes households (who are also landlords) and land developers in a regional land market. We then test the model empirically based on a national sample of urbanized areas. The results we obtained from both theoretical and empirical analyses indicate that increasing property tax rates reduces the size of urbanized areas.