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Identifying strategic interactions in Swedish local income tax policies

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Author Info
Edmark, Karin
Ågren, Hanna

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Abstract

This paper uses data on Swedish local governments to test for strategic interaction in local tax setting. We make use of a number of indirect predictions from the theories of tax competition and yardstick competition in order to test for the presence of strategic interaction in these forms. Using such additional predictions of the theories serves a twofold purpose--first it helps us establish if the spatial coefficient is due to strategic interactions or merely reflecting spatial error correlation, and second, it helps identify the source of interaction. The analysis provides strong evidence for spatial correlation in tax rates among Swedish local governments. Moreover, we find weak evidence of tax competition effects in the setting of tax rates.

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File URL: http://www.sciencedirect.com/science/article/B6WMG-4PCGRRT-2/2/f09341061e18e08b81b0be15072a5b6b
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Publisher Info
Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 63 (2008)
Issue (Month): 3 (May)
Pages: 849-857
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Handle: RePEc:eee:juecon:v:63:y:2008:i:3:p:849-857

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Web page: http://www.elsevier.com/locate/inca/622905

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Related research
Keywords: Local income tax Spatial auto-correlation Tax competition Yardstick competition Fiscal Federalism;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Maarten Allers & J. Elhorst, 2005. "Tax Mimicking and Yardstick Competition Among Local Governments in the Netherlands," International Tax and Public Finance, Springer, vol. 12(4), pages 493-513, August. [Downloadable!] (restricted)
  2. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2004. "Yardstick competition in intergovernmental relationships: theory and empirical predictions," Economics Letters, Elsevier, vol. 83(3), pages 325-333, June. [Downloadable!] (restricted)
  3. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March. [Downloadable!] (restricted)
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  4. Buettner, Thiess, 2001. "Local business taxation and competition for capital: the choice of the tax rate," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 215-245, April. [Downloadable!] (restricted)
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  5. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    Other versions:
  6. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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  7. Wallace E. Oates, 2002. "Fiscal and Regulatory Competition: Theory and Evidence," Perspektiven der Wirtschaftspolitik, Blackwell Publishing, vol. 3(4), pages 377-390, November. [Downloadable!] (restricted)
  8. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314.
  9. Craig Brett & Joris Pinkse, 2000. "The determinants of municipal tax rates in British Columbia," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 695-714, August. [Downloadable!] (restricted)
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  10. Bucovetsky, Sam & Smart, Michael, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  11. Dahlberg, Matz & Edmark, Karin, 2004. "Is there a "Race-to-the-Bottom" in the Setting of Welfare Benefit Levels? Evidence from a Policy Intervention," Working Paper Series 2004:19, Uppsala University, Department of Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Blomquist, Sören & Christiansen, Vidar, 2007. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," Working Paper Series 2007:7, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics. [Downloadable!]
  3. Beechey, Meredith & Österholm, Pär, 2007. "The Rise and Fall of U.S. Inflation Persistence," Working Paper Series 2007:18, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  4. Kjellberg, David & Post, Erik, 2007. "A Critical Look at Measures of Macroeconomic Uncertainty," Working Paper Series 2007:14, Uppsala University, Department of Economics. [Downloadable!]
  5. Dahlberg, Matz & Mörk, Eva, 2008. "Is there an election cycle in public employment? Separating time effects from election year effects," Working Paper Series 2008:3, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  6. Alexius, Annika & Holmlund, Bertil, 2007. "Monetary Policy and Swedish Unemployment Fluctuations," Working Paper Series 2007:17, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  7. Edmark, Karin, 2007. "Strategic Competition in Swedish Local Spending on Childcare, Schooling and Care for the Elderly," Working Paper Series 2007:21, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
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