Local labor markets as a taxable location factor? Evidence from a shock to foreign labor supply

Justus Nover

No 23-012, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper examines how municipal taxes respond to the local impact of a labor market shock. The analysis exploits a commuting policy that liberalized cross-border labor markets between Switzerland and the EU. The reform was implemented at a time of skilled labor shortages and led to a substantial inflow of cross-border workers into Swiss border municipalities. Identification rests on exogenous regional variation in treatment intensities based on commuting times. The results show that corporate tax changes are significantly larger than zero in highly-treated border municipalities after the reform and when compared to less-affected regions. This is consistent with the theory according to which governments can tax rents that arise from productive location factors - an interpretation supported by several model extensions and robustness tests. The results on personal income taxation indicate a similar yet smaller and lagged response.

Keywords: productive amenities; agglomeration; cross-border commuting; skill shortage; tax competition; Swiss-EU agreement (search for similar items in EconPapers)
JEL-codes: H71 J61 R23 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eur, nep-geo, nep-int, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/273392/1/1852077824.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:23012

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().