Property tax and farmland use in urban areas: Evidence from the reform in the early 1990s in Japan

Abstract

It is often said that farmland conservation in urban areas (i.e., cities and inner suburbs) is not desirable because it hinders the conversion of farmland into residential areas, thereby deterring urbanization. To solve such a problem, the Japanese government rectified the property tax preferential treatment of urban farmland in the 1990s. We utilize this reform as a natural experiment and examine its impact on land use. The empirical results show that the reform did not encourage the conversion of urban farmland into housing lots. This is one of the reasons concerning the shortage of housing supply in urban areas in Japan.