Fiscal Competition and the Composition of Public Spending: Theory and Evidence

Arbeitspapier

In this paper, we consider fiscal competition between jurisdictions. Capital taxes are used to finance a public input and two public goods, one which benefits mobile skilled workers and one which benefits immobile unskilled workers. We derive the jurisdictions? reaction functions for different spending categories. We then estimate these reaction functions using data from German communities. Thereby we explicitly allow for a spatially lagged dependent variable and a possible spatial error dependence by applying a generalized spatial tow-stage least squares (GS2SLS) procedure. The results show, that there is significant interaction between spending of neighbouring counties in Germany.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 528

Classification and Topics

• Classification: Wirtschaft ; Geographic Labor Mobility; Immigrant Workers ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Intergovernmental Relations; Federalism; Secession
• Subject: Tax competition ; capital skill complementarity ; public spending ; spatial econometrics ; Steuerwettbewerb ; Öffentliche Ausgaben ; Kommunale Finanzpolitik ; Qualifikation ; Arbeitsmobilität ; Raumwirtschaftstheorie ; Ökonometrisches Modell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Borck, Rainald ; Caliendo, Marco ; Steiner, Viktor
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/18379
• Last update: 10.03.2025, 11:43 AM CET