Tax mimicking in the short- and the long-run: Evidence from German reunification

Konferenzbeitrag

This paper uses the quasi-experiment of Germany's reunification to identify local tax mimicking by municipalities in Eastern-Germany. After reunification, East-German municipalities were allowed to independently set, for the first time in decades, local business and property tax rates. I explore whether the tax rates chosen by East-German border municipalities were influenced by the tax rates of adjacent West-German municipalities. To obtain causal estimates, I rely on instrumental variables regressions within the spatial lag framework, using West-German border municipalities' tax rates in 1989 as instruments for their post-reunification tax rates. The results suggest that East-German municipalities mimicked business tax rates immediately after reunification, but not in later years. I find no evidence of mimicking for property taxes. These results indicate that mimicking is not an important determinant of local tax policy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Local Taxation ; No. E22-V2

Classification and Topics

• Classification: Wirtschaft ; State and Local Taxation, Subsidies, and Revenue ; Intergovernmental Relations; Federalism; Secession ; Taxation, Subsidies, and Revenue: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baskaran, Thushyanthan
• Event: Veröffentlichung
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/113088
• Last update: 10.03.2025, 11:43 AM CET