Further Empirical Evidence on Property Taxation and the Occurrence of Urban Sprawl

How does the effective rate of property taxation in a United States urbanized area influence the occurrence of urban sprawl (measured as greater land used for a given population) observed there? Economic theory indicates that the portion of property taxation assessed on the non-land components of a residential parcel exerts opposite influences on the intensity of capital (building and machinery) use on the parcel through a negative Improvement Effect and a positive Dwelling Size Effect. An empirical assessment of this issue is therefore necessary; however, methodological concerns in earlier empirical analyses cast doubt on the reliability of what was previously reported. The use here of years 2000 and 2010 panel data from 370 comparable, single-state United States urbanized areas, coupled with a more fully specified set of explanatory variables and fixed-effects regression methodology, results in greater confidence that the estimated influences of effective rates of commercial, industrial, single family residential, and multifamily residential property taxation on land use is valid.