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Local tax interaction and endogenous spatial weights based on quality of life

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  • Francisco J. Delgado
  • Santiago Lago-Peñas
  • Matías Mayor

Abstract

This paper studied the role of municipal quality of life as a driver of strategic tax interactions among local governments. A number of studies point out the existence of strategic interactions using spatial econometric models in which the spatial weights are mostly based on non-economic criteria or basic economic variables such as per capita gross domestic product (GDP). We propose the more sophisticated well-being indicator of municipal quality of life as the driver for these interactions. To deal with the potential endogeneity, we rely on instrumental variable estimators. The empirical analysis focuses on the main local tax in Spain (property) and on municipalities with more than 50,000 inhabitants, and it confirms the relevance of differentials in quality of life for the understanding of tax choices.

Suggested Citation

  • Francisco J. Delgado & Santiago Lago-Peñas & Matías Mayor, 2018. "Local tax interaction and endogenous spatial weights based on quality of life," Spatial Economic Analysis, Taylor & Francis Journals, vol. 13(3), pages 296-318, July.
    • Handle: RePEc:taf:specan:v:13:y:2018:i:3:p:296-318
    DOI: 10.1080/17421772.2018.1420213
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    Cited by:

    1. Roberto Basile & Francesca Licari, 2020. "The spatial extent of network externalities in international migration," Discussion Paper series in Regional Science & Economic Geography 2020-02, Gran Sasso Science Institute, Social Sciences, revised May 2020.
    2. Julián Ramajo & Alejandro Ricci-Risquete & Lourdes Jerez & Geoffrey J. D. Hewings, 2020. "Impacts of Neighbors on Local Tax Rates: A Space–Time Dynamic Panel Data Analysis," International Regional Science Review, , vol. 43(1-2), pages 105-127, January.
    3. Feld, Lars P. & Frey, Christian & Schaltegger, Christoph A. & Schmid, Lukas A., 2021. "Fiscal federalism and income inequality: An empirical analysis for Switzerland," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 463-494.

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