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Journal of Urban Economics

Property Tax and Urban Sprawl: Theory and Implications for US Cities

Journal Article
Reference
Song, Yan and Yves Zenou (2006). “Property Tax and Urban Sprawl: Theory and Implications for US Cities”. Journal of Urban Economics 60(3), 519–534. doi.org/10.1016/j.jue.2006.05.001

Authors
Yan Song, Yves Zenou

We develop a model that adopts a log-linear utility function with a variable elasticity of substitution greater than one and show that increasing the property tax reduces city size unambiguously. We then test this result using a dataset of effective property tax rates we developed using GIS methods for 448 urbanized areas. The empirical analysis estimates a regression equation relating an urbanized area’s size to the property tax rate measure and other control variables such as population, income, agricultural rent, and transportation expenditure. We find that higher property taxes indeed result in smaller cities.