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Taxing Property in Developing Countries
Using Mexican natural experiments, this NBER paper finds that raising property-tax rates increases welfare, while heavy-handed enforcement can reduce it.
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
- 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.
- 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
- Companion survey: Franzsen & McCluskey, Property Tax in Africa (2017) — the institutional context for these experimental results
- Outcome: Property taxes raise welfare in developing countries
Sources
- Brockmeyer, Estefan, Ramírez Arras & Suárez Serrato (2021), "Taxing Property in Developing Countries: Theory and Evidence from Mexico," NBER Working Paper 28637 — used for the causal (Mexico City) evidence that raising property-tax rates increases compliance and welfare, while coercive enforcement can reduce welfare. PDF · 📄 Local copy