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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:

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    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. Sixia Chen & Yuan Fang & Shengfeng Lu & Haotian Zhang, 2024. "Tackle spurious invoices challenges to VAT compliance: a quasi-experiment of input VAT deduction reform in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(5), pages 1342-1387, October.
    4. 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.
    5. 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).
    6. Iddrisu, Khadijah & Adu, Kofi Osei, 2020. "Property Tax Compliance in Twifo Hemang Lower Denkyira District in the Central Region of Ghana: Does Distance to Nearest Tax Office Matter?," MPRA Paper 121159, University Library of Munich, Germany, revised 2024.
    7. 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.
    8. Matias Giaccobasso & Brad C. Nathan & Ricardo Perez-Truglia & Alejandro Zentner, 2022. "Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending," NBER Working Papers 29789, National Bureau of Economic Research, Inc.
    9. Cohen, Isabelle, 2024. "Technology and the state: Building capacity to tax via text," Journal of Public Economics, Elsevier, vol. 236(C).
    10. Víctor Mauricio Castañeda-Rodríguez & Gaetano Lisi, 2024. "Can public efficiency increase tax morale? Evidence from 18 Latin American countries," Economics of Governance, Springer, vol. 25(2), pages 209-231, June.

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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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