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How Differences in Property Taxes within Cities Affect Urban Sprawl?

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  • Song, Yan

    ()
    (University of North Carolina at Chapel Hill, USA)

  • Zenou, Yves

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

This article attempts a formal analysis of the connection between the differentiated property tax rates within urban areas and urban spatial pattern in U.S. cities. We first develop a duocentric-city model where the Central Business District (CBD) is located at the origin while the Suburban Business District (SBD) is at the other end of the city. We show that the ratio between the property tax in the suburbs and in the center has an ambiguous impact on the size of the city. We then test this model empirically to determine this sign by using a dataset of effective property tax rates we developed using GIS techniques for central cities and suburbs in 445 urbanized areas. The empirical analysis estimates the link between these two variables by controlling for variables such as population, income, agricultural rent, commuting cost, climate, crime, and employment structure. Results from the empirical analyses suggest that a lower property tax rate in the suburbs in comparison to the central city is associated with more expansive urban growth and greater level of decentralization of population and employment.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 754.

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Length: 45 pages
Date of creation: 19 Jun 2008
Date of revision:
Handle: RePEc:hhs:iuiwop:0754

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Keywords: Central City; Suburbs; Urban Sprawl; Urban Decentralization; Differentiated Property Tax;

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  1. Arnott, Richard J. & MacKinnon, James G., 1977. "The effects of the property tax: A general equilibrium simulation," Journal of Urban Economics, Elsevier, vol. 4(4), pages 389-407, October.
  2. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
  3. Marcy Burchfield & Henry G. Overman & Diego Puga & Matthew A. Turner, 2005. "Causes of sprawl: A portrait from space," Working Papers tecipa-192, University of Toronto, Department of Economics.
  4. Fujita, Masahisa & Thisse, Jacques-Francois & Zenou, Yves, 1997. "On the Endogeneous Formation of Secondary Employment Centers in a City," Journal of Urban Economics, Elsevier, vol. 41(3), pages 337-357, May.
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  6. Karl E. Case & James H. Grant, 1991. "Property Tax Incidence in a Multijurisdictional Neoclassical Model," Public Finance Review, , vol. 19(4), pages 379-392, October.
  7. Wheaton, William C., 1974. "A comparative static analysis of urban spatial structure," Journal of Economic Theory, Elsevier, vol. 9(2), pages 223-237, October.
  8. Oates, Wallace E. & Schwab, Robert M., 1997. "The Impact of Urban Land Taxation: The Pittsburgh Experience," National Tax Journal, National Tax Association, vol. 50(1), pages 1-21, March.
  9. Henderson, Vernon & Mitra, Arindam, 1996. "The new urban landscape: Developers and edge cities," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 613-643, December.
  10. Smith, T. E. & Zenou, Y., . "Dual labor markets, urban unemployment, and multicentric cities," CORE Discussion Papers RP -1283, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Thomas J. Nechyba & Randall P. Walsh, 2004. "Urban Sprawl," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 177-200, Fall.
  12. Song, Yan & Zenou, Yves, 2006. "Property tax and urban sprawl: Theory and implications for US cities," Journal of Urban Economics, Elsevier, vol. 60(3), pages 519-534, November.
  13. Edward L. Glaeser & Matthew E. Kahn, 2003. "Sprawl and Urban Growth," NBER Working Papers 9733, National Bureau of Economic Research, Inc.
  14. McGrath, Daniel T., 2005. "More evidence on the spatial scale of cities," Journal of Urban Economics, Elsevier, vol. 58(1), pages 1-10, July.
  15. Brueckner, Jan & Zenou, Yves, 2000. "Space And Unemployment: The Labour-Market Effects Of Spatial Mismatch," CEPR Discussion Papers 2397, C.E.P.R. Discussion Papers.
  16. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 775-805, 05.
  17. Jordan Rappaport, 2005. "The shared fortunes of cities and suburbs," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 33-60.
  18. McDonald, John F., 1989. "Econometric studies of urban population density: A survey," Journal of Urban Economics, Elsevier, vol. 26(3), pages 361-385, November.
  19. Brueckner, Jan K., 1987. "The structure of urban equilibria: A unified treatment of the muth-mills model," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 20, pages 821-845 Elsevier.
  20. Brueckner, Jan K & Kim, Hyun-A, 2003. "Urban Sprawl and the Property Tax," International Tax and Public Finance, Springer, vol. 10(1), pages 5-23, January.
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