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Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities

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  • Núria Bosch

    ()
    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

  • Albert Solé

    ()
    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

Abstract

We test the "yardstick competition" hypothesis by looking at the effects of property tax increases both in the locality and in other comparable jurisdictions on the incumbents' vote. In order to obtain unbiased estimates of the effects of taxes on voting, we account for national political shocks, ideological preferences of the citizenship and government traits, and we estimate the vote equation using instrumental variables. We also allow various traits of the government (ideology, coalition government, and first term government) to mediate the effects of taxes on voting. The vote equation was estimated using a large database containing nearly 3,000 Spanish municipalities and analysing three local elections (1995, 1999 and 2003). The results suggest that property tax increases, both at municipality and neighbourhood level, have a non-negligible impact on incumbent votes, and that this impact is especially high when: the government is right-wing, is a coalition, and is not in its first term.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2004/5.

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Length: 42 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:ieb:wpaper:505578art150

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Keywords: Local government; Taxes; Voting; Yardstick competition;

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References

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Citations

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Cited by:
  1. Laura Bianchini & Federico Revelli, 2011. "Green polities: urban environmental performance and government popularity," Working Papers 2011/18, Institut d'Economia de Barcelona (IEB).
  2. Werck, Kristien & Heyndels, Bruno & Geys, Benny, 2007. "The impact of central places on spatial spending patterns: evidence from Flemish local government cultural expenditures," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-10, Social Science Research Center Berlin (WZB).
  3. Lenka Šťastná, 2009. "Spatial Interdependence of Local Public Expenditures: Selected Evidence from the Czech Republic," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 007-025, March.
  4. José da Silva Costa & Armindo Cravalho, 2013. "Yardstick Competition among Portuguese Municipalities: The Case of Urban Property Tax (IMI)," FEP Working Papers 495, Universidade do Porto, Faculdade de Economia do Porto.
  5. Claudio A Agostini, 2011. "Neighbor Effects in the Provision of Public Goods in a Young Democracy: Evidence from China," Working Papers wp_008, Adolfo Ibáñez University, School of Government.
  6. Pierre Salmon, 2013. "How significant is yardstick competition among governments? Three reasons to dig deeper," Working Papers hal-00830872, HAL.
  7. Chiara Dalle Nogare & Matteo Galizzi, 2011. "The political economy of cultural spending: evidence from Italian cities," Journal of Cultural Economics, Springer, vol. 35(3), pages 203-231, August.
  8. Cláudio Burian Wanderley, 2010. "Evolução Da Arrecadação Tributária Municipal Em Minas Gerais No Início Do Novo Milênio," Anais do XIV Seminário sobre a Economia Mineira [Proceedings of the 14th Seminar on the Economy of Minas Gerais], in: Anais do XIV Seminário sobre a Economia Mineira [Proceedings of the 14th Seminar on the Economy of Minas Gerais] Cedeplar, Universidade Federal de Minas Gerais.
  9. Eric Dubois & Sonia Paty, 2010. "Yardstick Competition: Which Neighbours Matter?," Post-Print hal-00800705, HAL.
  10. Shun-ichiro Bessho & Kimiko Terai, 2011. "Competition for private capital and central grants: the case of Japanese industrial parks," Economics of Governance, Springer, vol. 12(2), pages 135-154, June.
  11. Finken, Jan, 2009. "Yardstick competition in German municipalities," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 09-3, University of Cologne, FiFo Institute for Public Economics.
  12. Revelli, Federico, 2008. "Performance competition in local media markets," Journal of Public Economics, Elsevier, vol. 92(7), pages 1585-1594, July.
  13. 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).
  14. Costas-Pérez, Elena & Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2012. "Corruption scandals, voter information, and accountability," European Journal of Political Economy, Elsevier, vol. 28(4), pages 469-484.

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