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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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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 157.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:157

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Keywords: Tax mimicking; business tax; property tax; intergovernmental equalization;

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  1. Baskaran, Thushyanthan, 2012. "The flypaper effect: evidence from a natural experiment in Hesse," MPRA Paper 37144, University Library of Munich, Germany.
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  23. Schaltegger, Christoph A & Kuttel, Dominique, 2002. " Exit, Voice, and Mimicking Behavior: Evidence from Swiss Cantons," Public Choice, Springer, vol. 113(1-2), pages 1-23, October.
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Cited by:
  1. Frank M. Fossen & Ronny Freier & Thorsten Martin, 2014. "Race to the Debt Trap? Spatial Econometric Evidence on Debt in German Municipalities," Discussion Papers of DIW Berlin 1358, DIW Berlin, German Institute for Economic Research.

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