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Identifying local tax mimicking: Administrative borders and a policy reform

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  • Baskaran, Thushyanthan

Abstract

This paper exploits an exogenous reform of the local fiscal equalization scheme in the German State of North Rhine-Westphalia to identify tax mimicking by municipalities in the neighboring state of Lower Saxony. The spatial lag regressions provide no evidence for the existence of strategic interactions in municipal business and property taxes. In contrast, traditional spatial lag regressions that rely on variation in neighbors' demographic, political, or economic characteristics for identification provide strong evidence for strategic interactions. This pattern of results indicates that most of the extant literature overestimates the importance of local tax mimicking.

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  • Baskaran, Thushyanthan, 2013. "Identifying local tax mimicking: Administrative borders and a policy reform," University of Göttingen Working Papers in Economics 157, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:157
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    Cited by:

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    2. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    3. Katarína Liptáková & Zuzana Rigová, 2021. "Financial assumptions of Slovak municipalities for their active participation in regional development," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(4), pages 312-330, June.

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    More about this item

    Keywords

    Tax mimicking; business tax; property tax; intergovernmental equalization;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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