A Monte Carlo Exploration of the Vertical Property Tax Inequity Models: Searching for a ‘Best’ Model

Joshua Fairbanks, Paul Goebel, Michael Morris and William Dare

Journal of Real Estate Literature, 2013, vol. 21, issue 1, 3-24

Abstract: We apply vertical inequity models to real estate data from Lubbock, Texas. We use Monte Carlo simulations to explore the performance of each inequity model. We generate eight different contrived inequity patterns from three different data-generating processes, which create 24 stylized data sets. The first data-generating process treats assessed values as a noisy function of sale prices, which reflect home values. The second process considers the sale price as a noisy function of assessed values. The final process considers both sale prices and assessed values to be a noisy measure of home values. Although our findings do not yield a “best” model, the results allow us to draw some conclusions and provide practitioners and academics with a road map to test for vertical tax inequity in future real estate data.

Date: 2013
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DOI: 10.1080/10835547.2013.12090355

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