Advanced Search
MyIDEAS: Login to save this article or follow this journal

Strategic fiscal interaction across borders: Evidence from French and German local governments along the Rhine Valley

Contents:

Author Info

  • Cassette, Aurélie
  • Di Porto, Edoardo
  • Foremny, Dirk

Abstract

This article contributes to the literature on local tax interactions. Its novelty lies in its focus on the interactions of local governments across national borders. We use panel data for the French and German municipalities in the Rhine Valley for the period 2000–2007. The local governments of each country influence firms’ overall tax burdens, but the tax instruments available at the local level differ. We estimate panel models that distinguish between the effects of competing municipalities belonging to the same country and belonging to the other country. Our empirical model shows that local jurisdictions along borders choose their business tax rates based on those of their domestic neighbors and that foreign fiscal policy does not have an impact on the local domestic tax setting behavior in these contexts.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0094119011000829
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 72 (2012)
Issue (Month): 1 ()
Pages: 17-30

as in new window
Handle: RePEc:eee:juecon:v:72:y:2012:i:1:p:17-30

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Fiscal interactions; Tax competition; Spatial econometrics; Fiscal federalism;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Gérard, Marcel & Jayet, Hubert & Paty, Sonia, 2010. "Tax interactions among Belgian municipalities: Do interregional differences matter?," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(5), pages 336-342, September.
  2. Heyndels, Bruno & Vuchelen, Jef, 1998. "Tax Mimicking Among Belgian Municipalities," National Tax Journal, National Tax Association, National Tax Association, vol. 51(n. 1), pages 89-101, March.
  3. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
  4. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, Elsevier, vol. 133(1), pages 97-126, July.
  5. Ben Lockwood, 2004. "Competition in Unit vs. Ad Valorem Taxes," International Tax and Public Finance, Springer, Springer, vol. 11(6), pages 763-772, November.
  6. Devereux, Michael P & Griffith, Rachel, 2002. "Evaluating Tax Policy for Location Decisions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3247, C.E.P.R. Discussion Papers.
  7. Jan K. Brueckner & Luz A. Saavedra, 2000. "Do Local Governments Engage in Strategic Property-Tax Competition?," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0357, Econometric Society.
  8. Geys, Benny & Osterloh, Steffen, 2011. "Politicians' opinions on rivals in the competition for firms: An empirical analysis of reference points near a border," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 11-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Kukenova, Madina & Monteiro, Jose-Antonio, 2008. "Spatial Dynamic Panel Model and System GMM: A Monte Carlo Investigation," MPRA Paper 13405, University Library of Munich, Germany, revised Feb 2009.
  10. Edmark, Karin & Ågren, Hanna, 2006. "Identifying Strategic Interactions in Swedish Local Income Tax Policies," Working Paper Series, Uppsala University, Department of Economics 2006:22, Uppsala University, Department of Economics.
  11. Lars P. Feld & Emmanuelle Reulier, 2005. "Strategic Tax Competition in Switzerland: Evidence from a Panel of the Swiss Cantons," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2005-19, Center for Research in Economics, Management and the Arts (CREMA).
  12. Maarten Allers & J. Elhorst, 2005. "Tax Mimicking and Yardstick Competition Among Local Governments in the Netherlands," International Tax and Public Finance, Springer, Springer, vol. 12(4), pages 493-513, August.
  13. Sylvie Charlot & Sonia Paty, 2010. "Do Agglomeration Forces Strengthen Tax Interactions?," Urban Studies, Urban Studies Journal Limited, Urban Studies Journal Limited, vol. 47(5), pages 1099-1116, May.
  14. Alain Pentel & Sonia Paty & Hubert Jayet, 2002. "Existe-t-il des interactions fiscales stratégiques entre les collectivités locales," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 154(3), pages 95-105.
  15. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 17(1), pages 99-121, July.
  16. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  17. Matthieu Leprince & Thierry Madiès & Sonia Paty, 2007. "Business tax interactions among local governments : an empirical analysis of the French case," Working Papers, Institut National de la Recherche Agronomique, France 250925, Institut National de la Recherche Agronomique, France.
  18. Craig Brett & Joris Pinkse, 2000. "The determinants of municipal tax rates in British Columbia," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 33(3), pages 695-714, August.
  19. Goodspeed, Timothy J., 2002. "Tax competition and tax structure in open federal economies: Evidence from OECD countries with implications for the European Union," European Economic Review, Elsevier, Elsevier, vol. 46(2), pages 357-374, February.
  20. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, Elsevier, vol. 54(2), pages 199-217, September.
  21. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, Elsevier, vol. 92(5-6), pages 1210-1235, June.
  22. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, Elsevier, vol. 19(3), pages 356-370, May.
  23. European Commission, 2001. "Annex to Company Taxation in the Internal Market," Taxation Studies, Directorate General Taxation and Customs Union, European Commission 0006, Directorate General Taxation and Customs Union, European Commission.
  24. Eric Dubois & Matthieu Leprince & Sonia Paty, 2007. "The Effects of Politics on Local Tax Setting: Evidence from France," Urban Studies, Urban Studies Journal Limited, Urban Studies Journal Limited, vol. 44(8), pages 1603-1618, July.
  25. Sylvie Charlot & Sonia Paty, 2007. "Market access effect and local tax setting: evidence from French panel data," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 7(3), pages 247-263, May.
  26. Büttner, Thiess, 1998. "Local Business Taxation and Competition for Capital: The Choice of the Tax Rate," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 98-43, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  27. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0055, National Bureau of Economic Research, Inc.
  28. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  29. Esteller-Moré, Álex & Solé-Ollé, Albert, 1999. "Vertical income tax externalities and fiscal interdependence: evidence from the US," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 99-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  30. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 363-370, March.
  31. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  32. Federico Revelli, 2001. "Spatial patterns in local taxation: tax mimicking or error mimicking?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(9), pages 1101-1107.
  33. Tim Besley & Harvey S. Rosen, 1997. "Vertical externalities in tax settings: evidence from gasoline and cigarettes," IFS Working Papers, Institute for Fiscal Studies W97/23, Institute for Fiscal Studies.
  34. Masayoshi Hayashi & Robin Boadway, 2001. "An empirical analysis of intergovernmental tax interaction: the case of business income taxes in Canada," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 34(2), pages 481-503, May.
  35. Cassette, Aurélie & Paty, Sonia, 2008. "Tax competition among Eastern and Western European countries: With whom do countries compete?," Economic Systems, Elsevier, Elsevier, vol. 32(4), pages 307-325, December.
  36. Leonzio Rizzo, 2010. "Interaction between federal taxation and horizontal tax competition: theory and evidence from Canada," Public Choice, Springer, Springer, vol. 144(1), pages 369-387, July.
  37. Sole Olle, Albert, 2003. "Electoral accountability and tax mimicking: the effects of electoral margins, coalition government, and ideology," European Journal of Political Economy, Elsevier, Elsevier, vol. 19(4), pages 685-713, November.
  38. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers, Center for Global Development 125, Center for Global Development.
  39. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies, Directorate General Taxation and Customs Union, European Commission 0005, Directorate General Taxation and Customs Union, European Commission.
  40. Zew, 2008. "Effective levels of company taxation within an enlarged EU," Taxation Studies, Directorate General Taxation and Customs Union, European Commission 0022, Directorate General Taxation and Customs Union, European Commission.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Vincenzo Atella & Federico Belotti & Domenico Depalo & Andrea Piano Mortari, 2014. "Measuring spatial effects in presence of institutional constraints: the case of Italian Local Health Authority expenditure," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 967, Bank of Italy, Economic Research and International Relations Area.
  2. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, Elsevier, vol. 72(2), pages 240-251.
  3. Geys, Benny & Osterloh, Steffen, 2012. "Borders as boundaries to fiscal policy interactions? An empirical analysis of politicians' opinions on rivals in the competition for firms," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism", Social Science Research Center Berlin (WZB) SP II 2012-113, Social Science Research Center Berlin (WZB).
  4. Edoardo Di Porto & Vincent Merlin & Sonia Paty, 2013. "Cooperation among local governments to deliver public services : a "structural" bivariate response model with fixed effects and endogenous covariate," Working Papers, HAL halshs-00787600, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:72:y:2012:i:1:p:17-30. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.