IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v118y2019icp227-251.html
   My bibliography  Save this article

Property tax and property values: Evidence from the 2012 Italian tax reform

Author

Listed:
  • Oliviero, Tommaso
  • Scognamiglio, Annalisa

Abstract

This paper assesses the extent to which property taxes are capitalized into property values, exploiting the 2012 Italian tax reform. Municipal-level variation in the level of the property tax rates is instrumented using the exogenous staggered timing of local elections. We show that the incumbent local governments with upcoming elections in 2013 shifted the composition of fiscal revenues towards lower property tax. Our 2SLS estimate shows that a one standard deviation increase in municipal-level property tax intensity leads to a 2.7% reduction of municipal property values in the year of the reform. We elicit information on the characteristics of the compliers and show that these municipalities feature inefficient public spending and low social capital.

Suggested Citation

  • Oliviero, Tommaso & Scognamiglio, Annalisa, 2019. "Property tax and property values: Evidence from the 2012 Italian tax reform," European Economic Review, Elsevier, vol. 118(C), pages 227-251.
    • Handle: RePEc:eee:eecrev:v:118:y:2019:i:c:p:227-251
    DOI: 10.1016/j.euroecorev.2019.05.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292119301084
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.euroecorev.2019.05.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Füss, Roland & Lerbs, Oliver, 2017. "Do local governments tax homeowner communities differently?," ZEW Discussion Papers 17-036, ZEW - Leibniz Centre for European Economic Research.
    2. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    3. Padovano, Fabio & Petrarca, Ilaria, 2014. "Are the responsibility and yardstick competition hypotheses mutually consistent?," European Journal of Political Economy, Elsevier, vol. 34(C), pages 459-477.
    4. Oates, Wallace E, 1973. "The Effects of Property Taxes and Local Public Spending on Property Values: A Reply and Yet Further Results," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 1004-1008, July-Aug..
    5. James M. Poterba, 1991. "House Price Dynamics: The Role of Tax Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 143-204.
    6. Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March.
    7. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    8. Sung Hoon Kang & Mark Skidmore & Laura Reese, 2015. "The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 300-333, June.
    9. Andrew Haughwout & Robert Inman & Steven Craig & Thomas Luce, 2004. "Local Revenue Hills: Evidence from Four U.S. Cities," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 570-585, May.
    10. Atif Mian & Kamalesh Rao & Amir Sufi, 2013. "Household Balance Sheets, Consumption, and the Economic Slump," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1687-1726.
    11. Decio Coviello & Stefano Gagliarducci, 2017. "Tenure in Office and Public Procurement," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 59-105, August.
    12. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    13. Drazen, Allan & Eslava, Marcela, 2010. "Electoral manipulation via voter-friendly spending: Theory and evidence," Journal of Development Economics, Elsevier, vol. 92(1), pages 39-52, May.
    14. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    15. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2016. "Do Fiscal Rules Matter?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 1-30, July.
    16. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-971, Nov./Dec..
    17. Bai, ChongEn & Li, Qi & Ouyang, Min, 2014. "Property taxes and home prices: A tale of two cities," Journal of Econometrics, Elsevier, vol. 180(1), pages 1-15.
    18. Rosen, Kenneth T, 1982. "The Impact of Proposition 13 on House Prices in Northern California: A Test of the Interjurisdictional Capitalization Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 191-200, February.
    19. Tommaso Nannicini & Andrea Stella & Guido Tabellini & Ugo Troiano, 2013. "Social Capital and Political Accountability," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 222-250, May.
    20. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, April.
    21. Paolo Surico & Riccardo Trezzi, 2019. "Consumer Spending and Property Taxes," Journal of the European Economic Association, European Economic Association, vol. 17(2), pages 606-649.
    22. Mr. John Norregaard, 2013. "Taxing Immovable Property Revenue Potential and Implementation Challenges," IMF Working Papers 2013/129, International Monetary Fund.
    23. Brueckner, Jan K. & Saavedra, Luz A., 2001. "Do Local Governments Engage in Strategic Property-Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(2), pages 203-230, June.
    24. Chiara Bocci & Claudia Ferretti & Patrizia Lattarulo, 2019. "Spatial interactions in property tax policies among Italian municipalities," Papers in Regional Science, Wiley Blackwell, vol. 98(1), pages 371-391, February.
    25. Lorenzo Casaburi & Ugo Troiano, 2016. "Ghost-House Busters: The Electoral Response to a Large Anti–Tax Evasion Program," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 273-314.
    26. Alberto Alesina & Matteo Paradisi, 2017. "Political budget cycles: Evidence from Italian cities," Economics and Politics, Wiley Blackwell, vol. 29(2), pages 157-177, July.
    27. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
    28. Luca Repetto, 2018. "Political Budget Cycles with Informed Voters: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 128(616), pages 3320-3353, December.
    29. Jens Matthias Arnold & Bert Brys & Christopher Heady & Åsa Johansson & Cyrille Schwellnus & Laura Vartia, 2011. "Tax Policy for Economic Recovery and Growth," Economic Journal, Royal Economic Society, vol. 121(550), pages 59-80, February.
    30. Herbert A. Simon, 1943. "The Incidence of a Tax on Urban Real Property," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 57(3), pages 398-420.
    31. Richard W. England, 2016. "Tax Incidence and Rental Housing: A Survey and Critique of Research," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(2), pages 435-460, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Isaiah Hull & Anna Grodecka-Messi, 2022. "Measuring the Impact of Taxes and Public Services on Property Values: A Double Machine Learning Approach," Papers 2203.14751, arXiv.org.
    2. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.
    3. Chengrui Xiao & Bo Zhou, 2023. "Property taxes and rental housing: Evidence from China," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(4), pages 931-958, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.
    2. Tommaso Oliviero & Agnese Sacchi & Annalisa Scognamiglio & Alberto Zazzaro, 2019. "House prices and immovable property tax: Evidence from OECD countries," Metroeconomica, Wiley Blackwell, vol. 70(4), pages 776-792, November.
    3. Małkowska, Agnieszka & Telega, Agnieszka & Głuszak, Michał & Marona, Bartłomiej, 2021. "Spatial diversification of property tax policy – Searching for yardstick competition in Polish metropolitan areas," Land Use Policy, Elsevier, vol. 109(C).
    4. Bordignon, Massimo & Grembi, Veronica & Piazza, Santino, 2017. "Who do you blame in local finance? An analysis of municipal financing in Italy," European Journal of Political Economy, Elsevier, vol. 49(C), pages 146-163.
    5. Fuess, Roland & Lerbs, Oliver, 2017. "Do Local Governments Tax Homeowner Communities Differently?," Working Papers on Finance 1714, University of St. Gallen, School of Finance.
    6. Tengku Munawar Chalil, 2020. "Fiscal competitions among Indonesian municipalities: a spatial econometric analysis," Asia-Pacific Journal of Regional Science, Springer, vol. 4(1), pages 241-260, February.
    7. Picchio, Matteo & Santolini, Raffaella, 2020. "Fiscal rules and budget forecast errors of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 64(C).
    8. Björn Kauder, 2015. "Spatial Administrative Structure And Intrametropolitan Tax Competition," Journal of Regional Science, Wiley Blackwell, vol. 55(4), pages 626-643, September.
    9. Gianmarco Daniele & Tommaso Giommoni, 2019. "Corruption under Austerity," BAFFI CAREFIN Working Papers 19131, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    10. Emanuele Bracco & Marco Alberto De Benedetto & Maurizio Lisciandra, 2024. "Manipulating municipal budgets: unveiling opportunistic behavior of Italian mayors," Public Choice, Springer, vol. 198(3), pages 317-342, March.
    11. Schaltegger Christoph A., 2003. "Zum Problem räumlicher Nutzen-Spillover zentralörtlicher Leistungen. Einige empirische Ergebnisse aus dem Schweizer Föderalismus / Inter-jurisdictional Spillover Effects from Central Public Infrastruc," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(2), pages 159-175, April.
    12. Matteo Gamalerio, 2018. "Not Welcome Anymore: The Effect of Electoral Incentives on the Reception of Refugees," CESifo Working Paper Series 7212, CESifo.
    13. Shangfa Hou & Jiaying Wang & Degui Zhu, 2022. "Has the Newly Imposed Property Tax Controlled Housing Prices? An Analysis of China’s 2009–2020 Interprovincial Panel Data," Sustainability, MDPI, vol. 14(22), pages 1-18, November.
    14. Asmae AQZZOUZ & Michel DIMOU, 2022. "Tax mimicking in French counties," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 55, pages 113-132.
    15. Matthieu Leprince & Sonia Paty & Emmanuelle Reulier, 2005. "Choix d'imposition et interactions spatiales entre collectivités locales. Un test sur les départements français," Recherches économiques de Louvain, De Boeck Université, vol. 71(1), pages 67-93.
    16. Sung Hoon Kang & Mark Skidmore & Laura Reese, 2015. "The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 300-333, June.
    17. Ehrlich, Maximilian V. & Hilber, Christian A.L. & Schöni, Olivier, 2018. "Institutional settings and urban sprawl: Evidence from Europe," Journal of Housing Economics, Elsevier, vol. 42(C), pages 4-18.
    18. Michiel Gerritse, 2010. "Policy competition and agglomeration: a local government view," Working Papers 2010/31, Institut d'Economia de Barcelona (IEB).
    19. Grodecka, Anna & Hull, Isaiah, 2019. "The Impact of Local Taxes and Public Services on Property Values," Working Paper Series 374, Sveriges Riksbank (Central Bank of Sweden).
    20. Johan Lundberg, 2021. "Horizontal interactions in local personal income taxes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(1), pages 27-46, August.

    More about this item

    Keywords

    Real estate values; Property tax capitalization; Political budget cycle;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:118:y:2019:i:c:p:227-251. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eer .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.