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Tax competition and income sorting: Evidence from the Zurich metropolitan area

  • Schaltegger, Christoph A.
  • Somogyi, Frank
  • Sturm, Jan-Egbert

We provide empirical evidence on the influence of income taxes on the choice of residence of taxpayers at the local government level. The fact that Swiss communities can independently set tax multipliers, thereby shifting the progressive tax scheme that is fixed at the cantonal (state) level, enables us to study the effect of differences in income taxation on individuals' choice of location within an economically and culturally homogeneous region. Using panel IV regressions covering the years 1991-2003 and 171 communities in the Swiss canton of Zurich and spatial error regressions for the 171 communities in 2003, we find substantial evidence of sorting according to income.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 27 (2011)
Issue (Month): 3 (September)
Pages: 455-470

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Handle: RePEc:eee:poleco:v:27:y:2011:i:3:p:455-470
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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