LAND USE CHANGE AND PROPERTY TAXES: AN EMPIRICAL STUDY OF THE EFFECT OF PROPERTY TAXES ON THE TIMING OF LAND CONVERSION FROM AGRICULTURAL TO RESIDENTIAL DEVELOPMENT
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This study explores how property taxes affect the timing of development. The theoretical literature suggests that higher taxes increase the time to development, although there is some disagreement in the literature. We present a simple theoretical model to motivate an empirical model that explores how land use change decisions are made over time. A hazard model is used to predict factors that influence the time to development over an 11-year period in an urbanizing county in the Midwestern corn belt. The results suggest that higher taxes slow development, as expected. Over the 11-year period for our sample, we predict that 25% more agricultural land would have converted to development if taxes had not risen. We also find, however, that the effects are not constant across different land qualities. In particular, we find that higher taxes make higher quality agricultural land more susceptible to development.