Local Public Goods and Property Tax Compliance

Does property tax compliance improve when the supply of local public goods expands? This paper uses administrative property tax records and information on the rollout of first-time asphalting of streets in inhabited residential neighborhoods in Mexico to show that the provision of local public goods can improve property tax compliance rates. We put forward a simple explanation to link local public goods and property tax compliance: When citizens observe public goods being delivered, they update their beliefs about the government’s quality in public good provision and become more likely to comply.

JEL Classification Codes: H26, H41

Keywords: taxpayer behavior, property tax compliance, local public goods