Public Disclosure and Tax Compliance
with Priya Manwaring
Status: Fieldwork complete.
Funding: £98,300 (IGC and IDS/ICTD)
Pre-registration: AEA RCT Registry
Abstract: Property taxes are an important source of local government revenue, but compliance rates can be extremely low in developing country cities. This paper studies public disclosure, a common policy tool aimed at raising tax compliance. We partner with the Kampala Capital City Authority to randomise variations of their proposed public disclosure scheme. In this experiment, treatment notifications are administered by text message to roughly 80,000 unique phone numbers associated with roughly 200,000 tax-owing properties. We test the effectiveness of two separate approaches to disclosure: reporting delinquents and recognising compliers. Further, we separately identify the direct effect of disclosing an individual's behaviour from the knock-on effects caused by disseminating this information to others. We find positive direct effects of public reporting on compliance, but also negative negative knock-on effects. Interestingly, the recognition of compliers actually backfires with both direct and knock-on effects of recognition reducing compliance. This evidence suggests that there could be substantial distaste for public disclosure generally that lowers intrinsic tax morale. Overall, we find that simple enforcement reminders are a more effective policy tool at raising compliance.
The Economic Consequences of Statistical Property Valuation: Evidence from Kampala, Uganda
Abstract: To improve the cost-effectiveness of property tax administration, many governments in developing countries are turning to statistical procedures of property valuation. What are the economic implications of these procedures? With empirical evidence from Kampala, Uganda I study how the method of valuation impacts equity and revenue through effective tax rates. Valuation is never perfect, and discrepancies between true income and valuation result in effective tax rates at the individual property level that differ from the policy rate. I show generally that any assessment procedure that provides an unbiased prediction of property value will be regressive. I document that this regressivity is empirically important in Kampala; on average, the lowest-earning decile of landlords would face an effective tax rate that is 28% higher than the policy rate, while the top decile would face a 27% reduction. Furthermore, I develop a simple model of tax compliance to quantify how this regressivity in assessment will affect government revenues.
Improving the Effectiveness of Formal Housing Delivery in Tanzania
with Vernon Henderson, Francisco Líbano-Monteiro, Martina Manara, and Guy Michaels
Project Summary: Urban informality can reduce public and private investments, lower tax bases, and exacerbate urban disamenities. Therefore, a key policy instrument is the provision of surveyed, titled, and serviced de-novo plots in greenfield areas, on which residents build houses. Such development strategies are advocated to solve coordination problems in contexts with weak institutions and rapid, haphazard, and unorganized growth. However, these projects come with concerns that plots may be too large, roads poorly placed and constructed, and that strict regulation may leave some areas underdeveloped, if not vacant. Our research aim is to determine how to implement this de-novo approach in a more effective and inclusive way. We study the case of Tanzania which offers a unique context to compare the effects of public and private provision of formal plots. Since the early 2000s, the Government has delivered over 58,000 formal plots through the “20,000 plots” project, implemented in Dar es Salaam and other cities. Alongside this program, a burgeoning private sector has started to create new developments, at times following a similar model. We study the effects of land use planning regulation, amenity provision, and local market accessibility. Crucially, we will contrast the effectiveness of the government program with nascent market-based solutions.
Zoning laws and land value capture: Evidence from Rwanda
with Paul Brimble, Guy Michaels, and Matthew Sharp
Abstract: Rapid urbanisation in Africa and other developing regions increases demand for urban services, which local governments often struggle to provide. Land value capture and taxation through zoning presents an under-exploited opportunity to mitigate this problem. Rwanda, with its fast-growing cities, first adopted a comprehensive land use zoning law in 2013. Focusing on the urban fringe in Rwandan cities, we compare the value of (previously unbuilt) land zoned for residential use to nearby land zoned for agricultural use, allowing us to assess the potential for revenue generation from zoning.
with Giorgio Chiovelli, Elias Papaioannou, and Stelios Michalopoulos
Abstract: A considerable and growing research in economics, political science, and remote sensing is using satellite night-time lights to proxy local economic development, especially in Africa where data is more limited. However, there are still questions on where, when, and under what conditions luminosity can provide meaningful approximations of local economic activity. In this paper, we examine in detail the luminosity-development link in Africa, compiling new yearly series of nighttime lights across countries, administrative regions, and units. In the first part, we employ machine learning techniques (ensemble methods) to homogenize the data that come from satellites with different properties. We thus provide annualized series from 1992 till 2020 not only accounting for the quality of satellite sensor, top coding, and blooming, but also across satellite systems (older DMSP and newer VIIRS). Second, we examine the luminosity-GDP association across African countries, documenting strong correlations both in the cross-section and over time. Third, using hundreds of georeferenced (Demographic and Health) surveys for 34 African countries we examine the link between luminosity and local development proxies, years of schooling and enrollment, industry of employment, access to public goods, and asset wealth. We conduct the analysis both across regions and over time, further distinguishing between units of various spatial scales. We examine the relative performance of older DMSP data with newer VIIRS data and the newly-compiled harmonized series. Forth, we use the full population censuses in Mozambique to delve into finer administrative units with rich data. The DHS and Mozambique-census analysis yields the following regularities. First, both the old and the new, post-2013, luminosity series proxy well economic development at local levels. Night-time lights correlate strongly with education, industry of employment, and household assets across all levels of spatial resolution (down to 0.25 degree grid-cells across the continent, or admin 4 units in Mozambique), even when we explore variation across nearby units. Accounting for blooming, top-coding, and sensor quality yields stronger correlations, as compared to unadjusted lights series, in line with adjustments reducing measurement error. Second, the adjustments and harmonization appear particularly useful when conducting the analysis at fine levels of spatial aggregation, in levels and in changes.
Tenure security and demand for title deeds in urban Africa: evidence from Tanzania
with M. Manara
Abstract: Property rights are critical for the development of cities, yet urbanisation in sub-Saharan Africa is progressing rapidly with little land formalisation. Even where governments coordinate formalisation schemes, the uptake of land titles can be very low. In theory, there are private benefits to land title deeds, but these might be minimal or not perceived by landholders. Further, little is known about how landholders value the multiple dimensions of tenure security. We explore the determinants of demand for title deeds in two communities of Dar es Salaam, Tanzania, using a unique setting that is ideal for studying these questions. We elicit individual willingness-to-pay for title deeds using the Becker-DeGroot-Marschak method and then conduct in-depth interviews. Therefore our respondents are interviewed after having thought carefully about their personal valuation of the title deed. We find substantial demand for title deeds, but this is much lower than current fees. Our respondents value multiple functions of tenure and their valuation evolves during the regularisation process. The phases of planning and surveying can substantially reduce the risks of expropriation and trespassing, while land tiles are seen to further secure investment and inheritance rights, enabling long-term wealth accumulation. Further, landholders tend to postpone the acquisition of title deeds because the costs of title acquisition are high, while the expected benefits from land titles are projected in the distant future. These findings are important for understanding the low uptake of title deeds in sub-Saharan Africa, and how landholders value formal documents in a complex system of tenure security. Studying multiple and evolving dimensions of tenure security is essential to understand local demands for enhanced land institutions and inform effective public policy.
Rethinking Segregation: The Role of Social Connections in Racial Segregation
with A. Diemer and C.K. Tang
We study the extent of segregation in the social space of American cities. We measure segregation as the (lack of) actual personal connections between groups as opposed to conventional measures based on spatial relationships. We first conceptualise how social segregation in American cities compares to geographical segregation and why the differentiation is important. Second, we create city-level indices of social segregation and compare these with their spatial counterparts. We explore how various features of the urban space correlate with the discrepancies we observe. Third, we explore outcomes related to social exposure across neighbourhoods within-city and holding residential exposure fixed. Finally, we conclude with policy recommendations and avenues for future research.