The Politics of Property Taxation: Fiscal Infrastructure and Electoral Incentives in Brazil

Abstract

Land titling encourages private investment and enables tax collection. Yet, governments across the developing world often fail to invest in land registration systems, such as cadastral maps that record land ownership and values. In this paper, we describe and estimate the fiscal benefits and political costs that elected officials face when deciding whether to invest in this critical fiscal infrastructure. Focusing on Brazilian municipalities, we find that cadaster updates increase property tax revenue by around 15 percent. Officials covet this revenue, but they simultaneously seek to secure their reelection. Investing in the cadaster can generate political costs by angering tax-averse voters or undermining clientelism. When these political costs are large, we expect to see greater investment in the cadaster when officials do not face reelection pressures. Using a close-election regression discontinuity, we find that term-limited incumbents are around 15 percentage points more likely to update the cadaster.

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