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Do Local Governments Engage in Strategic Property-Tax Competition?

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Author Info
Jan K. Brueckner (University of Illinois at Urbana-Champagne)
Luz A. Saavedra (Central Bank of Columbia)

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Abstract

This paper uses spatial econometric methods to investigate property-tax competition among local governments. The theoretical model is drawn from the literature on tax competition, in which local jurisdictions choose property-tax rates taking into account the migration of mobile capital in response to tax differentials. Using a "spatial lag" econometric model, the paper estimates the reaction function of the representative community, which relates the community's property-tax rate to its own characteristics and to the tax rates in competing communities. A nonzero reaction-function slope indicates the presence of strategic interaction in the choice of tax rates. The estimation uses cross-section data on property taxes and other socio-economic variables for cities in the Boston metropolitan area. The results, which are presented for two periods before and after imposition of Proposition 2 1/2 (a tax limitation measure), indicate the presence of strategic interaction.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0357.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0357

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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.:
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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. Marco Salvi, 2003. "Ist eine höhere bauliche Dichte wünschenswert? Evidenz aus den Preisen von Einfamilienhäusern im Kanton Zürich," Urban/Regional 0306001, EconWPA, revised 09 Jun 2003. [Downloadable!]
  2. Fredrik Carlsen, Bjørg Langset and Jørn Rattsø, 2005. "The relationship between firm mobility and tax level: Empirical evidence of fiscal competition between local governments," Discussion Papers 424, Research Department of Statistics Norway. [Downloadable!]
    Other versions:
  3. Lars P. Feld & Emmanuelle Reulier, 2005. "Strategic Tax Competition in Switzerland: Evidence from a Panel of the Swiss Cantons," CREMA Working Paper Series 2005-19, Center for Research in Economics, Management and the Arts (CREMA). [Downloadable!]
    Other versions:
  4. Thomas Liebig & Patrick A. Puhani & Alfonso Sousa-Poza, 2006. "Taxation and Internal Migration: Evidence from the Swiss Census Using Community-Level Variation in Income Tax Rates," IZA Discussion Papers 2374, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Michela Redoano, 2007. "Fiscal Interactions Among European Countries. Does the EU Matter?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Buettner, Thiess, 2001. "Fiscal externalities in local tax competition : empirical evidence from a panel of German jurisdictions," ZEW Discussion Papers 01-11, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  7. Hans Pitlik, 2005. "Folgt die Steuerpolitik in der EU der Logik des Steuerwettbewerbs," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 256/2005, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
  8. Cletus C. Coughlin & Thomas A. Garrett & Rubén Hernández-Murillo, 2004. "Spatial probit and the geographic patterns of state lotteries," Working Papers 2003-042, Federal Reserve Bank of St. Louis. [Downloadable!]
  9. D. N. Figlio & V. W. Kolpin & W. E. Reid, . "Asymmetric Policy Interaction among Subnational Governments: Do States Play Welfare Games?," Institute for Research on Poverty Discussion Papers 1154-98, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
  10. Federico Revelli, 2004. "Performance Rating and Yardstick Competition in Social Service Provision," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. Rainald Borck & Marco Caliendo & Viktor Steiner, 2006. "Fiscal Competition and the Composition of Public Spending: Theory and Evidence," IZA Discussion Papers 2428, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  12. Daniel Millimet; Vasudha Rangaprasad, 2004. "Strategic Competition Amongst Public Schools," Econometric Society 2004 North American Summer Meetings 197, Econometric Society. [Downloadable!]
    Other versions:
  13. Thomas A. Garrett & Gary A. Wagner & David C. Wheelock, 2005. "A spatial analysis of state banking regulation," Working Papers 2003-044, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
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