Tax Interaction among Walloon Municipalities: Is there Room for Yardstick Competition, Intellectual Trend and Partisan Monopoly Effect?
AbstractThree sources of strategic tax interactions among local jurisdictions are usually considered in the literature: public expenditure spill-over, tax competition and yardstick competition. However, another source has now been suggested: the intellectual trend. According to that hypothesis, politicians of the same party tend to behave similarly: incumbents of the same party mimic each other’s policies. Moreover partisan politics may also act through a monopoly power effect linked to several terms of power for the same party, consecutively: a political party is more likely to have implemented tax rates corresponding to its ideology if it has ruled the municipality several legislatures in a row.The paper proposes an empirical analysis of tax interactions among Walloon municipalities (the Southern part of Belgium) in view of discriminating among the sources of interaction. Yardstick hypothesis, intellectual trend hypothesis and potential partisan monopoly power effect are tested. Spatial econometrics tools are used along a panel of local tax rates data from 1983 to 2008 and political data. Results confirm the existence of yardstick competition among Walloon municipalities but not that of behaviors in line with the intellectual trend hypothesis. Moreover evidence is found of a partisan monopoly power effect: several successive legislatures with a sole left-wing party in power increase the tax rates. Finally the presence of an electoral cycle is also clearly documented.
Download InfoIf 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.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4025.
Date of creation: 2012
Date of revision:
tax interactions; spatial econometrics; local tax rates; intellectual trend;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
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.:
- Foremny, Dirk & Riedel, Nadine, 2012.
"Business taxes and the electoral cycle,"
FZID Discussion Papers
43-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
- SALMON, Pierre, 1987.
"Decentralization as an incentive scheme,"
Institut des MathÃ©matiques Economiques â Document de travail de lâI.M.E. (1974-1993)
98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
- Revelli, Federico, 2003.
"Reaction or interaction? Spatial process identification in multi-tiered government structures,"
Journal of Urban Economics,
Elsevier, vol. 53(1), pages 29-53, January.
- Revelli Federico, 2002. "Reaction or interaction? Spatial process identification in multi-tiered government structures," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200202, University of Turin.
- 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.
- Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
- Raffaella Santolini, 2008. "A spatial cross-sectional analysis of political trends in Italian municipalities," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 431-451, 08.
- Borge, Lars-Erik, 1995. " Economic and Political Determinants of Fee Income in Norwegian Local Governments," Public Choice, Springer, vol. 83(3-4), pages 353-73, June.
- Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
- 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.
- Geys, Benny & Vermeir, Jan, 2008.
"Party cues and yardstick voting,"
Discussion Papers, Research Unit: Market Processes and Governance
SP II 2008-05, Social Science Research Center Berlin (WZB).
- Philip Jones & John Hudson, 1998.
"The role of political parties: An analysis based on transaction costs,"
Springer, vol. 94(1), pages 175-189, January.
- Jones, Philip R & Hudson, John, 1998. " The Role of Political Parties: An Analysis Based on Transaction Costs," Public Choice, Springer, vol. 94(1-2), pages 175-89, January.
- J. Elhorst, 2010. "Applied Spatial Econometrics: Raising the Bar," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(1), pages 9-28.
- 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.
- Heyndels, Bruno & Vuchelen, Jef, 1998. "Tax Mimicking Among Belgian Municipalities," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 89-101, March.
- Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
- Adjemian, Michael K. & Cynthia Lin, C.-Y. & Williams, Jeffrey, 2010. "Estimating spatial interdependence in automobile type choice with survey data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(9), pages 661-675, November.
- J. Paul Elhorst & Sandy Fréret, 2009. "Evidence Of Political Yardstick Competition In France Using A Two-Regime Spatial Durbin Model With Fixed Effects," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 931-951.
- Roger H. Gordon, 1982.
"An Optimal Taxation Approach to Fiscal Federalism,"
NBER Working Papers
1004, National Bureau of Economic Research, Inc.
- Gérard, Marcel & Jayet, Hubert & Paty, Sonia, 2010. "Tax interactions among Belgian municipalities: Do interregional differences matter?," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 336-342, September.
- Helen F. Ladd, 1992. "Mimicking of Local Tax Burdens Among Neighboring Counties," Public Finance Review, , vol. 20(4), pages 450-467, October.
- Wallace E. Oates, 2002. "Fiscal and Regulatory Competition: Theory and Evidence," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(4), pages 377-390, November.
- Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Aurélie Cassette & Sonia Paty, 2006. "La concurrence fiscale entre communes est-elle plus intense en milieu urbain qu’en milieu rural ?," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 78, pages 5-30.
- Redoano, Michela, 2003. "Fiscal Interactions Among European Countries," The Warwick Economics Research Paper Series (TWERPS) 680, University of Warwick, Department of Economics.
- Revelli, Federico & Tovmo, Per, 2007. "Revealed yardstick competition: Local government efficiency patterns in Norway," Journal of Urban Economics, Elsevier, vol. 62(1), pages 121-134, July.
- Federico Revelli, 2002. "Testing the taxmimicking versus expenditure spill-over hypotheses using English data," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1723-1731.
- Stanislav Stakhovych & Tammo H.A. Bijmolt, 2009. "Specification of spatial models: A simulation study on weights matrices," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 389-408, 06.
- Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer, vol. 12(4), pages 475-492, August.
- Francisco J. Delgado & Santiago Lago-Peñas & Matías Mayor, 2011. "On the determinants of local tax rates: new evidence from Spain," Working Papers 2011/4, Institut d'Economia de Barcelona (IEB).
- Schaltegger, Christoph A & Kuttel, Dominique, 2002. " Exit, Voice, and Mimicking Behavior: Evidence from Swiss Cantons," Public Choice, Springer, vol. 113(1-2), pages 1-23, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If references are entirely missing, you can add them using this form.