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Public good provision and property tax compliance: Evidence from a natural experiment

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  • Carrillo, Paul E.
  • Castro, Edgar
  • Scartascini, Carlos

Abstract

Positive inducements and rewards have become a popular tool of tax administrations around the world. Yet, evaluation of the impact of rewards has been mostly absent from the empirical literature on tax compliance. In this paper we evaluate the effect of positive rewards on property tax compliance by exploiting a natural experiment in which a municipality of Argentina randomly selected 400 individuals among more than 72,000 taxpayers who had complied with the payment of their property tax. These individuals were publicly recognized and awarded the construction of a sidewalk. Results indicate that: (i) few additional taxpayers pay delinquent bills in order to participate; (ii) winning the lottery has large positive and persistent effects; (iii) there are sizable spillover effects, as neighbors of lottery winners increase their overall compliance. Providing a durable and visible public good seems to bring lasting positive effects on tax compliance.

Suggested Citation

  • Carrillo, Paul E. & Castro, Edgar & Scartascini, Carlos, 2021. "Public good provision and property tax compliance: Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 198(C).
    • Handle: RePEc:eee:pubeco:v:198:y:2021:i:c:s004727272100058x
    DOI: 10.1016/j.jpubeco.2021.104422
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    Cited by:

    1. Dario Tortarolo & Guillermo Cruces & Gonzalo Vazquez-Bare, 2023. "Design of partial population experiments with an application to spillovers in tax compliance," IFS Working Papers W23/17, Institute for Fiscal Studies.
    2. Kresch, Evan Plous & Walker, Mark & Best, Michael Carlos & Gerard, François & Naritomi, Joana, 2023. "Sanitation and property tax compliance: Analyzing the social contract in Brazil," Journal of Development Economics, Elsevier, vol. 160(C).
    3. Busso, Matias & Ibáñez, Ana María & Messina, Julián & Quigua, Juliana, 2023. "Preferences for redistribution in Latin America," LSE Research Online Documents on Economics 120687, London School of Economics and Political Science, LSE Library.
    4. Fatas, Enrique & Nosenzo, Daniele & Sefton, Martin & Zizzo, Daniel John, 2021. "A self-funding reward mechanism for tax compliance," Journal of Economic Psychology, Elsevier, vol. 86(C).
    5. Adeosun Oluwaseun Titi & Adebowale Israel Olukayode, 2022. "Property Tax and Sustainable Development in Ekiti State: Citizens’ Perspective," Central European Journal of Public Policy, Sciendo, vol. 16(2), pages 18-29, December.

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    More about this item

    Keywords

    Rewards; Positive incentives; Persistence; Spillovers; Tax compliance; Public goods; Public policy;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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