Further empirical evidence on residential property taxation and the occurrence of urban sprawl

Abstract

Economic theory indicates that as the effective rate of taxation on residential property rises, a negative influence on capital intensity could occur through less multi-story structures built (an Improvement Effect). Alternatively, a positive influence on capital intensity could occur through housing consumers switching to smaller houses built on smaller lots (a Dwelling Size Effect). An empirical assessment of this issue is therefore necessary; however, methodological concerns in earlier empirical analyses cast doubt on the reliability of findings. Panel data, fixed effects, regression results indicate that a higher rate of effective residential property taxation increases the amount of land used for a given population (greater sprawl).