Demonstrates how real estate investment negatively impacts local tax revenue in rapidly growing economies, suggesting significant economic implications.
This study identifies a novel form of the crowding-out effect. While real estate investment has long been considered a major contributor to local tax revenue, many rapidly growing economies, such as China, rely heavily on it. This research reveals new findings with both theoretical and practical significance. Using a series of general equilibrium models, we demonstrate a significant relationship between real estate investment and local tax revenue. Specifically, the ratio of real estate investment to local GDP shows a negative correlation with both the ratio of local tax revenue to GDP and their respective growth rates. These results confirm that real estate investment crowds out local tax revenue relative to GDP.
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Liu et al. (2026) studied this question.
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