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Local property tax reform and municipality spending efficiency

Antonio Afonso and Ana Venâncio

No 2022/0210, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We investigate the effect on municipality spending efficiency of a local property tax reform, which reduced in 2008 the upper limit of the property tax. We compute municipality efficiency scores via data Envelopment Analysis (DEA) from 2005 to 2011, and then we rely in a panel data set to estimate how the tax reform affected the efficiency scores. Results of the analysis show that average input efficiency scores declined from 0.575 before the tax reform to 0.488 after the tax reform. This change was transversal to municipalities that reduced the municipal property tax (IMI) and to the ones that maintained the tax rate. In addition, the IMI reform is linked to higher efficiency scores. In other words, the reduction in efficiency ends up being smaller for the municipalities that decreased the IMI tax rate.

Keywords: public spending efficiency; local government; data envelopment analyis (DEA); local property tax reform. (search for similar items in EconPapers)
JEL-codes: C14 C23 H11 H21 H50 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-acc, nep-eur, nep-pbe and nep-ure
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Working Paper: Local Property Tax Reform and Municipality Spending Efficiency (2022) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp02102022

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