Taxing Property in Developing Countries

Summary

This 2021 NBER working paper (w28637) studies property taxation in a developing-country context using administrative data and natural experiments from Mexico City and other Mexican municipalities.

Key Findings

1. Rate increases raise welfare. Raising the property-tax rate generated revenue with limited distortion and positive welfare effects — consistent with property/land taxes being relatively efficient.
2. Enforcement is double-edged. Aggressive enforcement against delinquent taxpayers, by contrast, could reduce welfare, implying the gains come mainly from the rate on compliant owners rather than from coercive collection.

The study is valuable because rigorous causal evidence on land and property taxation outside rich countries is scarce.

Bears On

• Outcome: Property taxes raise welfare in developing countries

Sources

1. Brockmeyer, Estefan, Ramírez Arras & Suárez Serrato (2021), "Taxing Property in Developing Countries: Theory and Evidence from Mexico," NBER Working Paper 28637. PDF