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Borders as boundaries to fiscal policy interactions? An empirical analysis of politicians' opinions on rivals in the competition for firms

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  • Geys, Benny
  • Osterloh, Steffen

Abstract

Studies of spatial policy interdependence in (local) public policies usually concentrate on the relations between jurisdictions within a single analysed region, and disregard possible extra-regional effects. However, the theoretical spatial statistics literature shows that biased estimates might emerge if spatial interactions extend beyond the boundaries of the available data (i.e., the boundary value problem). This paper empirically assesses the practical relevance of this concern by studying German local politicians' assessments of their jurisdictions' main competitors in the struggle to attract firms. We find that location near a border significantly undermines politicians' perception that the fiercest competitive pressure derives from jurisdictions within their own state. This effect sets in about 20km (10.2km) from a national (international) border. These results indicate that nearest municipalities perceive each other as competitors regardless of the state or country where they are located, which has important implications for estimating spatial dependence models. --

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" with number SP II 2012-113.

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Date of creation: 2012
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Handle: RePEc:zbw:wzbfff:spii2012113

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Keywords: government interaction; boundary value problem; border effects; policy interdependence;

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References

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Cited by:
  1. Yongzheng Liu & Jorge Martinez-Vazquez, 2014. "Inter-Jurisdictional Tax Competition In China," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper1403, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Janeba, Eckhard & Osterloh, Steffen, 2012. "Tax and the city: A theory of local tax competition and evidence for Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 12-005, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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