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Does fiscal coopération increase local tax rates in urban areas?

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Author Info

  • Sylvie Charlot

    ()
    (INRA-GAEL (UMR 1215), 1221 rue des résidences 38400 Saint Martin d'Hères (France))

  • Sonia Paty

    ()
    (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)

  • Virginie Piguet

    ()
    (INRA UMR1041 CESAER, 26 boulevard Dr Petitjean, BP 87999, 21079 Dijon Cedex, France)

Abstract

The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience in urban municipalities. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003 and an unbalanced data set. As predicted by the theory, we find that reducing the number of municipalities is likely to limit tax competition and, as a consequence, increase local business tax rates.

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 1219.

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Date of creation: 2012
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Handle: RePEc:gat:wpaper:1219

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Keywords: fiscal cooperation; tax competition; vertical externalities; local business tax;

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References

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  1. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
  2. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
  3. Devereux, Michael & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal And Vertical Indirect Tax Competition : Theory And Some Evidence From The Usa," The Warwick Economics Research Paper Series (TWERPS) 704, University of Warwick, Department of Economics.
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Cited by:
  1. 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 halshs-00787600, HAL.

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