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The Effects of Politics on Local Tax Setting: Evidence from France

Author

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  • Eric Dubois

    (Laboratoire d'Economie Publique, Maison des Sciences Economiques, 106-112 Boulevard de l'Hôpital, 75647 Paris France, eric.dubois@univ-parisl.fr)

  • Matthieu Leprince

    (Faculty of Economics, University of Rennes 1, 7 Place Hoche, CS 86514, 35065 Rennes France, matthieu. leprince@univ-rennesl.fr)

  • Sonia Paty

    (Sonia Paty is in the Faculty of Economics, University of Lille I and INRA-CESAER, Cite Scientifique, 59655 Villeneuve d'Ascq, France. E-mail: sonia.paty@univ-lille1.fr)

Abstract

This paper investigates the hypothesis that local politics has an impact on local taxation in the French public sector by using a cross-sectional dataset on departments in 1999. Political variables are included in a tax-setting equation to provide empirical evidence whether local governments in France adopt business taxation behaviour closer to the Leviathan government hypothesis, with higher tax rates when political competition decreases, or to the partisan government hypothesis, with differences in tax rates according to partisan variables. It is shown that the wider the seat's margin, the lower the tax rates, and that this cut is weaker in the case of a left-wing local majority than a right-wing majority. It is therefore concluded that the partisan government hypothesis is more supported by the French data than the Leviathan one, even after controlling for tax interdependencies between departments.

Suggested Citation

  • Eric Dubois & Matthieu Leprince & Sonia Paty, 2007. "The Effects of Politics on Local Tax Setting: Evidence from France," Urban Studies, Urban Studies Journal Limited, vol. 44(8), pages 1603-1618, July.
  • Handle: RePEc:sae:urbstu:v:44:y:2007:i:8:p:1603-1618
    DOI: 10.1080/00420980701373487
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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. Sylvie Charlot & Sonia Paty & Michel Visalli, 2013. "Assessing the impact of local taxation on property prices: a spatial matching contribution," Applied Economics, Taylor & Francis Journals, vol. 45(9), pages 1151-1166, March.
    3. Padovano, Fabio & Petrarca, Ilaria, 2014. "Are the responsibility and yardstick competition hypotheses mutually consistent?," European Journal of Political Economy, Elsevier, vol. 34(C), pages 459-477.
    4. Dae Jin Kim & In Kwon Park, 2017. "The local distribution of endowments matters: Modelling tax competition with heterogeneous local residents," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3239-3259, November.
    5. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.
    6. Francisco J. Delgado & Santiago Lago-Peñas & Matías Mayor, 2015. "On The Determinants Of Local Tax Rates: New Evidence From Spain," Contemporary Economic Policy, Western Economic Association International, vol. 33(2), pages 351-368, April.
    7. Małkowska, Agnieszka & Telega, Agnieszka & Głuszak, Michał & Marona, Bartłomiej, 2021. "Spatial diversification of property tax policy – Searching for yardstick competition in Polish metropolitan areas," Land Use Policy, Elsevier, vol. 109(C).
    8. Eric Dubois & Sonia Paty, 2010. "Yardstick competition: which neighbours matter?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 433-452, June.
    9. Hammadou, Hakim & Paty, Sonia & Savona, Maria, 2014. "Strategic interactions in public R&D across European countries: A spatial econometric analysis," Research Policy, Elsevier, vol. 43(7), pages 1217-1226.
    10. Paul Smoke, 2013. "Why Theory and Practice are Different: The Gap Between Principles and Reality in Subnational Revenue Systems," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    11. Paul Smoke, 2014. "Why theory and practice are different: The gap between principles and reality in subnational revenue systems," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 9, pages 287-325, Edward Elgar Publishing.
    12. Nelly Exbrayat, 2016. "Does trade liberalization trigger tax competition? Theory and evidence from OECD countries," Working Papers halshs-01328769, HAL.
    13. Jordi Jofre-Monseny & Albert Solé-Ollé, 2008. "Which communities should be afraid of mobility? The effects of agglomeration economies on the sensitivity of firm location to local taxes," Working Papers 2008/4, Institut d'Economia de Barcelona (IEB).
    14. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    15. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    16. Cassette, Aurélie & Di Porto, Edoardo & Foremny, Dirk, 2012. "Strategic fiscal interaction across borders: Evidence from French and German local governments along the Rhine Valley," Journal of Urban Economics, Elsevier, vol. 72(1), pages 17-30.

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