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Does inter-municipal cooperation reduce the intensity of tax competition? Evidence on inter-local industrial parks in Germany

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  • Bischoff, Ivo
  • Das, Sourav
  • Kosfeld, Reinhold

Abstract

We ask whether inter-municipal cooperation serve as a platform by which municipalities coordinate tax policies and reduce the intensity of tax competition. Specifically, we focus on inter-municipal cooperation in form of inter-local industrial parks. We apply the case study-oriented synthetic control method (SCM) to analyze the causal impact of 12 inter-local industrial parks on municipal tax-setting behavior using data on municipalities from West-German states of Hesse and North Rhine Westphalia between 2000 and 2018. We find evidence that inter-local industrial parks lead to tax coordination in some occasions but not in others. Our ex post analysis suggests that tax coordination only takes place in specific political constellations.

Suggested Citation

  • Bischoff, Ivo & Das, Sourav & Kosfeld, Reinhold, 2025. "Does inter-municipal cooperation reduce the intensity of tax competition? Evidence on inter-local industrial parks in Germany," European Journal of Political Economy, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:poleco:v:87:y:2025:i:c:s0176268025000096
    DOI: 10.1016/j.ejpoleco.2025.102649
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    Keywords

    Inter-local industrial parks; Inter-municipal cooperation; Tax coordination; Counterfactual analysis; Synthetic control method;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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