Fiscal competition over taxes and public inputs

Hauptmeier S, Mittermaier F, Rincke J (2012)

Publication Language: English

Publication Type: Journal article

Publication year: 2012

Journal

Regional Science and Urban Economics Elsevier

Publisher: Elsevier

Book Volume: 42

Pages Range: 407-419

Journal Issue: 3

DOI: 10.1016/j.regsciurbeco.2011.10.007

Abstract

Governments are widely perceived as competing for capital by choosing parameters in a multi-dimensional policy space. We consider the choice of a business tax rate as well as a productive public input by local governments and estimate a model of strategic interaction in both policy instruments. The estimations suggest that local governments use both the business tax rate and public inputs to compete for capital. We find that if neighbors cut their tax rates, governments try to restore competitiveness by lowering their own tax and increasing public inputs. If neighbors provide more infrastructure, governments react by increasing their own spending.

Authors with CRIS profile

Johannes Rincke Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftspolitik

Involved external institutions

Die Europäische Zentralbank / European Central Bank (EZB / ECB) DE Germany (DE) Ludwig-Maximilians-Universität (LMU) DE Germany (DE)

How to cite

APA:

Hauptmeier, S., Mittermaier, F., & Rincke, J. (2012). Fiscal competition over taxes and public inputs. Regional Science and Urban Economics, 42(3), 407-419. https://dx.doi.org/10.1016/j.regsciurbeco.2011.10.007

MLA:

Hauptmeier, Sebastian, Ferdinand Mittermaier, and Johannes Rincke. "Fiscal competition over taxes and public inputs." Regional Science and Urban Economics 42.3 (2012): 407-419.

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