Identifying local tax mimicking: Administrative borders and a policy reform

Thushyanthan Baskaran

No 157, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: This paper exploits an exogenous reform of the local fiscal equalization scheme in the German State of North Rhine-Westphalia to identify tax mimicking by municipalities in the neighboring state of Lower Saxony. The spatial lag regressions provide no evidence for the existence of strategic interactions in municipal business and property taxes. In contrast, traditional spatial lag regressions that rely on variation in neighbors' demographic, political, or economic characteristics for identification provide strong evidence for strategic interactions. This pattern of results indicates that most of the extant literature overestimates the importance of local tax mimicking.

Keywords: Tax mimicking; business tax; property tax; intergovernmental equalization (search for similar items in EconPapers)
JEL-codes: H20 H71 H77 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-ure
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:157

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