Does inter-municipal cooperation reduce the intensity of tax competition? Evidence on inter-local industrial parks in Germany

Ivo Bischoff, Sourav Das and Reinhold Kosfeld

European Journal of Political Economy, 2025, vol. 87, issue C

Abstract: We ask whether inter-municipal cooperation serve as a platform by which municipalities coordinate tax policies and reduce the intensity of tax competition. Specifically, we focus on inter-municipal cooperation in form of inter-local industrial parks. We apply the case study-oriented synthetic control method (SCM) to analyze the causal impact of 12 inter-local industrial parks on municipal tax-setting behavior using data on municipalities from West-German states of Hesse and North Rhine Westphalia between 2000 and 2018. We find evidence that inter-local industrial parks lead to tax coordination in some occasions but not in others. Our ex post analysis suggests that tax coordination only takes place in specific political constellations.

Keywords: Inter-local industrial parks; Inter-municipal cooperation; Tax coordination; Counterfactual analysis; Synthetic control method (search for similar items in EconPapers)
JEL-codes: H25 H71 H77 R58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:87:y:2025:i:c:s0176268025000096

DOI: 10.1016/j.ejpoleco.2025.102649

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