Fiscal Spillovers in Property Tax Revenues: Evidence from Mexican Municipalities

This research uses spatial econometric methods to investigate fiscal spillovers in property tax revenues among local governments in Mexico from 2001 to 2019. Instead of focusing on statutory tax rates, it analyzes the property tax ratio — defined as the share of property tax revenues in total municipal income — to capture a broader notion of fiscal effort. Using dynamic spatial panel models, the study estimates how municipal tax effort responds to neighboring jurisdictions’ fiscal behavior. The results indicate the presence of significant interjurisdictional spillovers, suggesting that municipalities adjust their tax revenue performance in response to surrounding fiscal environments, consistent with mechanisms of fiscal benchmarking or yardstick competition.