Reproducibility package for Taxing Property In Developing Countries: Theory And Evidence From Mexico

THIS PACKAGE HAS NOT YET BEEN VERIFIED AND IS CURRENTLY UNDER REVIEW.

We model and estimate the welfare effects of the property tax—the most under-utilized tax in developing countries. Our model shows property tax hikes impact welfare by reducing compliance and exacerbating liquidity constraints. Enforcement impacts welfare by subjecting non-compliant taxpayers to threats of fines and property seizure. The model yields a sufficient-statistics condition indicating when tax hikes raise welfare more than enforcement. In our setting, administrative data, sharp tax increases, and an enforcement experiment show both policies increase revenue. Tax hikes also raise welfare because revenue gains surpass liquidity costs. However, enforcement reduces welfare as threat costs overshadow revenue increases.