Fiscal competition over taxes and public inputs - theory and evidence

Arbeitspapier

We set up a model to characterize the reaction functions of governments competing for mobile capital by simultaneously setting both the business tax rate as well as the level of provision of a productive public input. Using a rich data set of local jurisdictions, we then test the predictions of the model with respect to the nature of strategic interaction among governments. Our findings from efficient estimation of a system of spatially interrelated equations for both policy instruments support the notion that local governments use both the business tax rate and public inputs to compete for capital. In particular, we find that if neighbors cut their tax rates, governments try to restore competitiveness by lowering their own tax and increasing spending on public inputs. If neighbors provide more infra-structure, governments react by increasing their own spending on public inputs.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 1033

Klassifikation und Themen

• Klassifikation: Wirtschaft ; State and Local Budget and Expenditures ; Intergovernmental Relations; Federalism; Secession ; Noncooperative Games
• Thema: public input competition ; system estimation ; Tax competition ; Wirtschaftsförderung ; Standortwettbewerb ; Steuerwettbewerb ; Infrastrukturversorgung ; Schätzung ; Baden-Württemberg ; Deutschland

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Hauptmeier, Sebastian ; Mittermaier, Ferdinand ; Rincke, Johannes
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/153467
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ