Yardstick Competition among Portuguese Municipalities: The Case of Urban Property Tax (IMI)
In this paper we gather empirical evidence on the existence of strategic interaction among Portuguese municipal executives when they set rates of property tax and in particular if we are in the presence of yardstick competition. For that purpose, we adopted the assumption of geographic interaction among Portuguese municipalities when setting rates of property tax. We have estimated, for evaluated and non-evaluated urban property, spatial lag models with two spatial dependency regimes (municipalities with and without a solid majority) and cross-section fixed effects coefficients. The results provide strong empirical evidence on the existence of strategic interaction among Portuguese municipalities when setting rates of municipal taxes and on the yardstick hypothesis.
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