Higher property-tax rates raise welfare in developing countries

The Claim

In developing economies, raising the rate of recurrent property (and land) taxation tends to increase welfare — generating revenue with little distortion — making it one of the more attractive fiscal tools where state capacity is weak.

The Evidence

• Brockmeyer et al. (2021, NBER) use natural experiments in Mexico and find that property-tax rate increases raised welfare, while aggressive enforcement against delinquents could lower it. The gains come from the rate on compliant owners, not from coercion.
• This aligns with the IMF's global assessment that property/land taxes are efficient but under-used, with large untapped potential in developing countries.

Strength of Evidence

Moderate. The Brockmeyer evidence is causally rigorous but from one country; generalisation to other contexts is plausible but not established.

See Also

• Land Value Tax · Deadweight Loss

Sources

1. Brockmeyer et al. (2021), "Taxing Property in Developing Countries," NBER — wiki summary
2. IMF (2013), "Taxing Immovable Property" — wiki summary