Tax Interaction among Walloon Municipalities: Is there Room for Yardstick Competition, Intellectual Trend and Partisan Monopoly Effect?
Three sources of strategic tax interactions among local jurisdictions are usually considered in the literature: public expenditure spill-over, tax competition and yardstick competition. However, another source has now been suggested: the intellectual trend. According to that hypothesis, politicians of the same party tend to behave similarly: incumbents of the same party mimic each other’s policies. Moreover partisan politics may also act through a monopoly power effect linked to several terms of power for the same party, consecutively: a political party is more likely to have implemented tax rates corresponding to its ideology if it has ruled the municipality several legislatures in a row.The paper proposes an empirical analysis of tax interactions among Walloon municipalities (the Southern part of Belgium) in view of discriminating among the sources of interaction. Yardstick hypothesis, intellectual trend hypothesis and potential partisan monopoly power effect are tested. Spatial econometrics tools are used along a panel of local tax rates data from 1983 to 2008 and political data. Results confirm the existence of yardstick competition among Walloon municipalities but not that of behaviors in line with the intellectual trend hypothesis. Moreover evidence is found of a partisan monopoly power effect: several successive legislatures with a sole left-wing party in power increase the tax rates. Finally the presence of an electoral cycle is also clearly documented.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gordon, Roger H, 1983.
"An Optimal Taxation Approach to Fiscal Federalism,"
The Quarterly Journal of Economics,
MIT Press, vol. 98(4), pages 567-86, November.
- Jones, Philip R & Hudson, John, 1998.
" The Role of Political Parties: An Analysis Based on Transaction Costs,"
Springer, vol. 94(1-2), pages 175-89, January.
- Philip Jones & John Hudson, 1998. "The role of political parties: An analysis based on transaction costs," Public Choice, Springer, vol. 94(1), pages 175-189, January.
- Redoano, Michela, 2003. "Fiscal Interactions Among European Countries," The Warwick Economics Research Paper Series (TWERPS) 680, University of Warwick, Department of Economics.
- Timothy Besley & Anne Case, 1992.
"Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition,"
NBER Working Papers
4041, National Bureau of Economic Research, Inc.
- Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
- Stanislav Stakhovych & Tammo H.A. Bijmolt, 2009. "Specification of spatial models: A simulation study on weights matrices," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 389-408, 06.
- Francisco J. Delgado & Santiago Lago-Peñas & Matías Mayor, 2011.
"On the determinants of local tax rates: new evidence from Spain,"
2011/4, Institut d'Economia de Barcelona (IEB).
- 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, 04.
- Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
- Revelli, Federico, 2003.
"Reaction or interaction? Spatial process identification in multi-tiered government structures,"
Journal of Urban Economics,
Elsevier, vol. 53(1), pages 29-53, January.
- Revelli Federico, 2002. "Reaction or interaction? Spatial process identification in multi-tiered government structures," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200202, University of Turin.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Federico Revelli, 2002. "Testing the taxmimicking versus expenditure spill-over hypotheses using English data," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1723-1731.
- Dirk Foremny & Nadine Riedel, 2012.
"Business Taxes and the Electoral Cycle,"
CESifo Working Paper Series
3729, CESifo Group Munich.
- Dirk Foremny & Nadine Riedel, 2012. "Business taxes and the electoral cycle," Working Papers 2012/3, Institut d'Economia de Barcelona (IEB).
- Foremny, Dirk & Riedel, Nadine, 2012. "Business taxes and the electoral cycle," FZID Discussion Papers 43-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).
- Geys, Benny & Vermeir, Jan, 2008.
"Party cues and yardstick voting,"
European Journal of Political Economy,
Elsevier, vol. 24(2), pages 470-477, June.
- Geys, Benny & Vermeir, Jan, 2008.
"Party cues and yardstick voting
[Parteien und 'Yardstick'-Wählen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-05, Social Science Research Center Berlin (WZB).
- Geys, Benny & Vermeir, Jan, 2008. "Party cues and yardstick voting
- Gérard, Marcel & Jayet, Hubert & Paty, Sonia, 2010. "Tax interactions among Belgian municipalities: Do interregional differences matter?," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 336-342, September.
- Adjemian, Michael K. & Cynthia Lin, C.-Y. & Williams, Jeffrey, 2010. "Estimating spatial interdependence in automobile type choice with survey data," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(9), pages 661-675, November.
- Borge, Lars-Erik, 1995. " Economic and Political Determinants of Fee Income in Norwegian Local Governments," Public Choice, Springer, vol. 83(3-4), pages 353-73, June.
- Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
- Raffaella Santolini, 2008. "A spatial cross-sectional analysis of political trends in Italian municipalities," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 431-451, 08.
- repec:rae:jouces:v:78:y:2006:i::p:5-30 is not listed on IDEAS
- Salmon, Pierre, 1987.
"Decentralisation as an Incentive Scheme,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 3(2), pages 24-43, Summer.
- SALMON, Pierre, 1987. "Decentralization as an incentive scheme," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
- Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer, vol. 12(4), pages 475-492, August.
- J. Elhorst, 2010. "Applied Spatial Econometrics: Raising the Bar," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(1), pages 9-28.
- J. Paul Elhorst & Sandy Fréret, 2009. "Evidence Of Political Yardstick Competition In France Using A Two-Regime Spatial Durbin Model With Fixed Effects," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 931-951.
- Heyndels, Bruno & Vuchelen, Jef, 1998. "Tax Mimicking Among Belgian Municipalities," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 89-101, March.
- Revelli, Federico & Tovmo, Per, 2007. "Revealed yardstick competition: Local government efficiency patterns in Norway," Journal of Urban Economics, Elsevier, vol. 62(1), pages 121-134, July.
- Wallace E. Oates, 2002. "Fiscal and Regulatory Competition: Theory and Evidence," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(4), pages 377-390, November.
- Maarten Allers & J. Elhorst, 2005. "Tax Mimicking and Yardstick Competition Among Local Governments in the Netherlands," International Tax and Public Finance, Springer, vol. 12(4), pages 493-513, August.
- Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
- Helen F. Ladd, 1992. "Mimicking of Local Tax Burdens Among Neighboring Counties," Public Finance Review, , vol. 20(4), pages 450-467, October.
- 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.
- Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4025. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.