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Politicians' opinions on rivals in the competition for firms: An empirical analysis of reference points near a border

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  • Geys, Benny
  • Osterloh, Steffen

Abstract

Studies of spatial policy interdependence in (local) public policies usually concentrate on the relations between jurisdictions within a single analysed region, and disregard possible extra-regional effects. This paper evaluates the validity of such restriction by studying German local politicians' assessments of their jurisdictions' main competitors in the struggle to attract firms. We find that location near a border significantly undermines politicians' perception that the fiercest competitive pressure derives from jurisdictions within their own state. This effect sets in about 20km (12.5km) from a national (international) border. We also confirm that intranational borders are perceived as much less constraining for firms than international ones, even in a highly integrated area such as the European Union. Overall, these results indicate that nearest municipalities perceive each other as competitors regardless of the state or country where they are located. The practical implications of these findings for future studies on spatial policy interdependence are discussed.

Suggested Citation

  • Geys, Benny & Osterloh, Steffen, 2011. "Politicians' opinions on rivals in the competition for firms: An empirical analysis of reference points near a border," ZEW Discussion Papers 11-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:11020
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    References listed on IDEAS

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    1. Marius Brülhart & Raphaël Parchet, 2010. "Alleged Tax Competition: The Mysterious Death of InheritanceTaxes in Switzerland," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 10.04, Université de Lausanne, Faculté des HEC, DEEP.
    2. Brülhart, Marius & Carrère, Céline & Trionfetti, Federico, 2012. "How wages and employment adjust to trade liberalization: Quasi-experimental evidence from Austria," Journal of International Economics, Elsevier, vol. 86(1), pages 68-81.
    3. 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.
    4. Beatrix Eugster & Raphaël Parchet, 2011. "Culture and Taxes: Towards Identifying Tax Competition," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 11.05, Université de Lausanne, Faculté des HEC, DEEP.
    5. Jouke van Dijk & Piet H. Pellenbarg, 2000. "Firm relocation decisions in The Netherlands: An ordered logit approach," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(2), pages 191-219.
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    Cited by:

    1. Janeba, Eckhard & Osterloh, Steffen, 2012. "Tax and the city: A theory of local tax competition and evidence for Germany," ZEW Discussion Papers 12-005, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. 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.

    More about this item

    Keywords

    government interaction; competition; border effects; policy interdependence;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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