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Does Highway Accessibility Influence Local Tax Factors? Evidence from German Municipalities

Luisa Dörr () and Stefanie Gäbler ()

No 321, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We examine how highway accessibility influences tax policy. We exploit the stagewise expansion of the “Baltic Sea highway” in the East German state Mecklenburg-Western Pomerania as the largest contiguous highway construction project in Germany since 1945. For non-agglomeration municipalities that lie on a convenient route between two larger cities the access and opening year are close to random. Results from difference-in-differences estimations and an event study approach show that highway access influences local tax setting in municipalities within 5 to 10 km road distance. Improved accessibility increases property tax factors persistently by roughly 6 percentage points. Our effects are driven by peripheral municipalities, while we do not find an influence on core municipalities. Additionally, improved accessibility gives rise to a shift of population and economic activity from the periphery to the core.

Keywords: Highway; infrastructure; accessibility; tax factors; municipalities; local governments (search for similar items in EconPapers)
JEL-codes: H54 H71 O18 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eur, nep-tre and nep-ure
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