The Spillover Effects of Land Value Taxation: How Can It Affect Your Neighbors' Job Growth?

This paper is the first to empirically investigate the spillover effects of land value taxation. Using rich panel data for municipalities in Pennsylvania over the period 1980–2010, this study extends the existing research by offering the first evidence on the external impacts of land value taxation as well as the spatial dynamics of these impacts. The empirical model separately identifies the spillover effects of land value taxation and the externalities associated with traditional property taxation. The study shows that taxing land at a higher rate than structures on the land slows down employment growth in close neighbors but speeds up employment growth in neighbors within a longer distance. The findings suggest that land value taxation generates differential spillover effects across space. The paper discusses two underlying effects behind the observed differential impacts and opens up new avenues for further research.