Testing Rent-Seeking in Brazil: Inequalities and Property Tax Collection in Brazilian Municipalities

Link to full Working Paper

This article examines the relationship between income inequality and IPTU revenues in Brazilian municipalities. With panel data for the years 2000 and 2010, we evaluate the existence of rent-seeking (“capture by the elite”) through lobby of the richest with the mayors. Our results provide statistical evidence in favor of rent-seeking existence, since IPTU revenues tend to decrease with the increase of inequality in municipalities, especially in the poorest ones, even after controlling for fixed effects and the imputed value of rents. In addition, among the richest municipalities, we found a positive association of income inequality with education and culture expenditures, which could suggest the absence of rent-seeking and the prevalence of the median voter.

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