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The relationship between firm mobility and tax level: Empirical evidence of fiscal competition between local governments

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  • Fredrik Carlsen
  • Bjørg Langset
  • Jørn Rattsø

    ()
    (Statistics Norway)

Abstract

The mobility of the tax base may influence fiscal outcomes. The many theoretical contributions about the role of mobility are not matched by empirical evidence. Existing studies address strategic interaction between governments, but have little to say about mobility. We introduce a new measure of mobility conditions based on the geographic profit variability of industrial sectors. The econometric analysis shows a systematic negative relationship between mobility conditions and tax level among municipalities in Norway. The analysis takes into account neighborhood effects in a spatial model, and the endogeneity of mobility conditions is handled with instrumental variables.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 424.

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Date of creation: Jun 2005
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Handle: RePEc:ssb:dispap:424

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Keywords: Fiscal competition; mobility; local taxation;

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Cited by:
  1. Jordi Jofre-Monseny & Albert Solé-Ollé, 2008. "Which Communities should be afraid of Mobility? The Effects of Agglomeration Economies on the Sensitivity of Firm Location to Local Taxes," CESifo Working Paper Series 2311, CESifo Group Munich.
  2. Karen Crabb? & Hylke Vandenbussche, 2008. "Are your firm's taxes set in Warsaw? Spatial tax competition in Europe," LICOS Discussion Papers 21608, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  3. Leon Bettendorf & Joeri Gorter & Albert van der Horst, 2006. "Who benefits from tax competition in the European Union?," CPB Document 125, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Osterloh, Steffen & Heinemann, Friedrich, 2013. "The political economy of corporate tax harmonization — Why do European politicians (dis)like minimum tax rates?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 18-37.
  5. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.
  6. Hansjörg Blöchliger & José Maria Pinero Campos, 2011. "Tax Competition Between Sub-Central Governments," OECD Working Papers on Fiscal Federalism 13, OECD Publishing.
  7. Jørn Rattsø & Jon Hernes Fiva, 2005. "Decentralization with Property Taxation to Improve Incentives: Evidence from Local Governments’ Discrete Choice," Working Paper Series 5305, Department of Economics, Norwegian University of Science and Technology, revised 02 Sep 2005.
  8. Jon Fiva & Jørn Rattsø, 2007. "Local choice of property taxation: evidence from Norway," Public Choice, Springer, vol. 132(3), pages 457-470, September.
  9. Jofre-Monseny, Jordi & Solé-Ollé, Albert, 2012. "Which communities should be afraid of mobility? The effects of agglomeration economies on the sensitivity of employment location to local taxes," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 257-268.
  10. Timothy P. Hubbard & Justin Svec, 2012. "A Model of Tradeable Capital Tax Permits," Working Papers 1202, College of the Holy Cross, Department of Economics.
  11. Jordi Jofre-Monseny, 2010. "Is agglomeration taxable?," Working Papers 2010/15, Institut d'Economia de Barcelona (IEB).

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