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Inter-municipal cooperation and local taxation

Author

Listed:
  • Marie-Laure Breuillé

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement)

  • Pascale Duran-Vigneron

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Anne-Laure Samson

    (Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

Abstract

This paper studies how inter-municipal cooperation, through the creation of a new jurisdictional tier with transferred competencies and tax powers, affects the four main direct local tax rates (business tax, residence tax, property tax on developed land, property tax on undeveloped land) in France. We use an instrumented difference-in-differences method with an original, exhaustive panel of 36,530 French municipalities over the 1994–2010 period. Our estimation results show that inter-municipal cooperation led to an increase in the four (municipal plus inter-municipal) tax rates, which accounts for 35% of the increase observed by the taxpayer on average. Tax increases are greater for the four tax rates when a tax regime consisting in sharing tax-bases between municipal and inter-municipal governments has been adopted. As for municipal tax rates alone, the smaller the municipality, the sharper their decrease. Finally, the heterogeneity of the youth share of the population between municipalities is a key driver of the extent to which the impact of inter-municipal cooperation differs across municipalities.

Suggested Citation

  • Marie-Laure Breuillé & Pascale Duran-Vigneron & Anne-Laure Samson, 2018. "Inter-municipal cooperation and local taxation," Post-Print hal-03559017, HAL.
    • Handle: RePEc:hal:journl:hal-03559017
    DOI: 10.1016/j.jue.2018.08.001
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    Citations

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    Cited by:

    1. Zineb Abidi & Emmanuelle Taugourdeau, 2024. "Tax competition and harmonization where tastes for public goods differ," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 953-979, August.
    2. Sonia Paty & Morgan Ubeda, 2021. "Inter-municipal cooperation and the provision of local public goods," Working Papers 2121, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Clémence Tricaud, 2019. "Better alone? Evidence on the costs of intermunicipal cooperation," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2019-12-ccr, Condorcet Center for political Economy.
    4. repec:hal:journl:hal-03380333 is not listed on IDEAS
    5. Jia, Junxue & Ding, Siying & Liu, Yongzheng, 2020. "Decentralization, incentives, and local tax enforcement," Journal of Urban Economics, Elsevier, vol. 115(C).
    6. Agrawal, David R., 2016. "Local fiscal competition: An application to sales taxation with multiple federations," Journal of Urban Economics, Elsevier, vol. 91(C), pages 122-138.
    7. Geschwind, Stephan & Roesel, Felix, 2022. "Taxation under direct democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 536-554.
    8. Davide Luca & Felix Modrego, 2021. "Stronger together? Assessing the causal effect of inter‐municipal cooperation on the efficiency of small Italian municipalities," Journal of Regional Science, Wiley Blackwell, vol. 61(1), pages 261-293, January.
    9. Ivo Bischoff & Simon Melch & Eva Wolfschuetz, 2019. "Does tax competition drive cooperation in local economic development policies? Evidence on inter-local business parks in Germany," MAGKS Papers on Economics 201906, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Marco Di Cataldo & Licia Ferranna & Margherita Gerolimetto & Stefano Magrini, 2023. "Splitting Up or Dancing Together? Local Institutional Structure and the Performance of Urban Areas," Economic Geography, Taylor & Francis Journals, vol. 99(1), pages 81-110, January.
    11. David R. Agrawal & Jan K. Brueckner & Marius Brülhart, 2024. "Fiscal Federalism in the 21st Century," CESifo Working Paper Series 10951, CESifo.
    12. Banaszewska, Monika & Bischoff, Ivo & Bode, Eva & Chodakowska, Aneta, 2022. "Does inter-municipal cooperation help improve local economic performance? – Evidence from Poland," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    13. Naruki Notsu & Haruaki Hirota & Nobuo Akai, 2024. "Inter-municipal cooperation and tax enforcement capabilities," OSIPP Discussion Paper 24E004, Osaka School of International Public Policy, Osaka University.

    More about this item

    Keywords

    Inter-municipal cooperation; Tax disparities; Fiscal federalism; Difference-in-differences; Instrumental variables; Panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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