The role of interactions in the tax choices of the French cities

Le rôle des interactions dans les choix fiscaux des agglomérations françaises

Sonia Paty

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Abstract: The aim of this article is to explain the French agglomerations tax choices and more particularly the role of horizontal and vertical tax interactions in the choice of their local business tax. Initially, we build a model of local tax choice which takes into account both externalities. Then we estimate this model using the spatial econometrics techniques for the year 2004. We test the assumption that the rate of local business tax chosen by an agglomeration depends on those of the concurrent agglomerations, the departmental rate and the regional rate. We observe significant tax interactions between the French agglomerations. In addition, the local and departmental tax rates appear to be strategic complements. On the other hand, the regional rates do not seem to influence significantly the French agglomerations tax choices.

Date: 2006
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Published in Revue Française d'Economie, 2006, 20 (3), pp.87-114

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02654321

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