Evaluating the Structural Effects of Property Tax Abatements on Economic Development Across Industries: Dissertation Summary

Authors

Yu-Che Chang, Indiana University

Award Type

Honorable Mention

Dissertation Advisor

Joyce Man

Abstract

This research mainly comprises two empirical studies. First in an econometric analysis using statewide city-level data in Indiana, the first-difference model developed by Heckman and Hotz is applied to estimate the effect of property tax abatements (PTAs) over different sectors. The results indicate that a large majority of jobs created by the property tax abatement programs occur in the service sector, not the manufacturing sector. Despite the significant amount of attention focused on the manufacturing sector in discussions surrounding the implementation of property tax abatement programs, the analysis demonstrates that there is no significant contribution to employment in this sector. In addition, by applying the dummy variable technique, the analysis finds that the economic effect of PTAs diminishes over time. This finding confirms with the copycat behavior hypothesis proposed by previous scholars. Furthermore, the empirical results suggest that property tax abatements should be used only in the needy areas to maintain the long-term success of this program.

Link to dissertation full text