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Property Tax Abatement and the Simultaneous Determination of Local Fiscal Variables in a Metropolitan Area

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  • Robert W. Wassmer

Abstract

A model is given for the behavior of communities and firms in regards to the granting of local firm property tax abatements in a metropolitan area. The model yields a system of simultaneous equations that are estimated using a 1977-87 panel data set from the Detroit metropolitan area. Results indicate that firm property tax abatements are offered by a community to offset noncapitalized profit-reducing characteristics. Property tax abatements are effective at increasing nonresidential property bases, but at costs (decreased home values, increased local property tax rates, and increased state subsidies to local governments) that should not be ignored by policy makers.

Suggested Citation

  • Robert W. Wassmer, 1992. "Property Tax Abatement and the Simultaneous Determination of Local Fiscal Variables in a Metropolitan Area," Land Economics, University of Wisconsin Press, vol. 68(3), pages 263-282.
    • Handle: RePEc:uwp:landec:v:68:y:1992:i:3:p:263-282
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    Cited by:

    1. Esteban G. Dalehite & John L. Mikesell & C. Kurt Zorn, 2005. "Variation in Property Tax Abatement Programs Among States," Economic Development Quarterly, , vol. 19(2), pages 157-173, May.
    2. Sian Mughan & Geoffrey Propheter, 2017. "Estimating the Manufacturing Employment Impact of Eliminating the Tangible Personal Property Tax: Evidence From Ohio," Economic Development Quarterly, , vol. 31(4), pages 299-311, November.
    3. Anderson, John E. & Wassmer, Robert W., 1995. "The decision to 'bid for business': Municipal behavior in granting property tax abatements," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 739-757, December.
    4. Thomas M Fullerton Jr, 2004. "Empirical Evidence Regarding El Paso Property Tax Abatements: 1988-2001," Public Economics 0405007, University Library of Munich, Germany.
    5. Christine Wen, 2024. "Do Economic Development Tax Abatements Affect School Finances?," Economic Development Quarterly, , vol. 38(1), pages 3-14, February.
    6. Robert W. Wassmer, 1994. "Can Local Incentives Alter a Metropolitan City's Economic Development?," Urban Studies, Urban Studies Journal Limited, vol. 31(8), pages 1251-1278, October.

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