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Tax interactions among Belgian municipalities: Do interregional differences matter?

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  • Gérard, Marcel
  • Jayet, Hubert
  • Paty, Sonia

Abstract

This paper tests the existence of strategic interactions among municipalities, based on a panel of Belgian local tax rates from 1985 to 2004. A special emphasis is put on the role of the interregional differences in Belgium. Our results partly confirm previous findings for Belgium suggesting that municipalities interact over the local surcharge on the (labor) income tax rate but not on the local surcharge on the property tax. Using spatial econometrics tools and an original methodology for specifying weight matrices, we find that municipalities are sensitive to the local income tax rates set by only their closest neighbors. We cannot reject the hypothesis that interregional differences matter for municipalities belonging to the Brussels region: for the local income tax rate, the intensity of interactions is shown to be higher between municipalities belonging to the Brussels region than between municipalities belonging to different regions.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 5 (September)
Pages: 336-342

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Handle: RePEc:eee:regeco:v:40:y:2010:i:5:p:336-342

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Web page: http://www.elsevier.com/locate/regec

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Keywords: Tax interactions Panel data Spatial econometrics Local tax rates Tax competition;

References

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  1. Lars P. Feld & Emmanuelle Reulier, 2009. "Strategic Tax Competition in Switzerland: Evidence from a Panel of the Swiss Cantons," German Economic Review, Verein für Socialpolitik, vol. 10, pages 91-114, 02.
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  12. Jan K. Brueckner & Luz A. Saavedra, 2000. "Do Local Governments Engage in Strategic Property-Tax Competition?," Econometric Society World Congress 2000 Contributed Papers 0357, Econometric Society.
  13. Sylvie Charlot & Sonia Paty, 2007. "Market access effect and local tax setting: evidence from French panel data," Journal of Economic Geography, Oxford University Press, vol. 7(3), pages 247-263, May.
  14. 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, vol. 54(2), pages 199-217, September.
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Citations

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Cited by:
  1. Skidmore, Mark & Reese, Laura & Kang, Sung Hoon, 2012. "Regional analysis of property taxation, education finance reform, and property value growth," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 351-363.
  2. Marcel Gérard & Laurent van Malderen, 2012. "Tax Interaction among Walloon Municipalities: Is there Room for Yardstick Competition, Intellectual Trend and Partisan Monopoly Effect?," CESifo Working Paper Series 4025, CESifo Group Munich.
  3. 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 11-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Laurent Van Malderen & Marcel Gérard, 2012. "Tax Interaction Among Walloon Municipalities: Is There Room For Partisan Monopoly Effect?," ERSA conference papers ersa12p1051, European Regional Science Association.
  5. Benny Geys & Federico Revelli, 2011. "Economic and political foundations of local tax structures: an empirical investigation of the tax mix of Flemish municipalities," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 29(3), pages 410-427, June.
  6. Marie-Estelle Binet & Alain Guengant & Matthieu Leprince, 2012. "Overlapping jurisdictions and demand for local public services: does spatial heterogeneity matter?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201213, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  7. Guilherme Mendes Resende & Alexandre Xavier Ywata de Carvalho & Patrícia Alessandra Morita Sakowski, 2013. "Evaluating Multiple Spatial Dimensions of Economic Growth in Brazil Using Spatial Panel Data Models (1970 - 2000)," Discussion Papers 1830a, Instituto de Pesquisa Econômica Aplicada - IPEA.
  8. Kadiyali, Vrinda & Kosová, Renáta, 2013. "Inter-industry employment spillovers from tourism inflows," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 272-281.
  9. 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" SP II 2012-113, Social Science Research Center Berlin (WZB).
  10. Iwata, Shinichiro & Sumita, Kazuto & Fujisawa, Mieko, 2012. "Price competition in the spatial real estate market: Allies or rivals?," MPRA Paper 37438, University Library of Munich, Germany.
  11. Cassette, Aurélie & Di Porto, Edoardo & Foremny, Dirk, 2012. "Strategic fiscal interaction across borders: Evidence from French and German local governments along the Rhine Valley," Journal of Urban Economics, Elsevier, vol. 72(1), pages 17-30.
  12. Michael Keen & Kai A. Konrad, 2012. "International Tax Competition and Coordination," Working Papers international_tax_competi, Max Planck Institute for Tax Law and Public Finance.
  13. Janeba, Eckhard & Osterloh, Steffen, 2013. "Tax and the city — A theory of local tax competition," Journal of Public Economics, Elsevier, vol. 106(C), pages 89-100.

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