Fiscal competition over taxes and public inputs

Hauptmeier, Sebastian; Mittermaier, Ferdinand; Rincke, Johannes

doi:10.1016/j.regsciurbeco.2011.10.007

Cited by 80 publications

(60 citation statements)

References 27 publications

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“…The former is levied directly on business earnings, so that it can be regarded as a tax on capital and, as such, a highly mobile tax base. 6 These characteristics have already been exploited by empirical works which find strong evidence for interactions between neighbouring jurisdictions in this state (see Buettner, 2001, andHauptmeier et al, 2012). 4 We realise that beliefs about mobility do not necessarily have to be identical with real mobility, and therefore decision-makers might build their decisions on wrong perceptions of the reality.…”

Section: Survey Description and Resultsmentioning

confidence: 99%

“…Few of the empirical contributions on local tax competition (e.g., Buettner, 2001;Brueckner and Saavedra, 2001;Hauptmeier et al, 2012) enrich the empirical analyses with explicit theoretical considerations. These contributions are based on standard tax competition models in the tradition of the workhorse model by Zodrow and Mieszkowski (1986) and are modified by restricting the number of competing jurisdictions.…”

Section: Introductionmentioning

confidence: 99%

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Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

Janeba

Osterloh

2012

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:http://ftp.zew.de/pub/zew-docs/dp/dp12005.pdf Non-technical summaryIn this paper we use survey responses of mayors from cities and municipalities in the German state of Baden-Württemberg to study the "true" spatial structure of local tax competition. The size of the jurisdiction and, in particular, its economic function turn out to be the important determinants of the decision-maker's perception of the intensity of competition. In particular, respondents from urban centres perceive a much higher intensity of competition for firms with respect to competing jurisdictions which are distant or even located in other countries. Our empirical findings confirm the assumption of the empirical literature about the importance of neighbourhood competition, but it also shows that another important factor is missing. In particular, the assumption of the empirical literature that competition takes place only among neighbours is at odds with the theoretical approaches where all jurisdictions compete simultaneously. The existing standard models, however, are incapable of explaining the empirical particularities of local competition.These empirical findings motivate our sequential tax competition model which considers a rich competition structure. Essentially, we assume a number of metropolitan regions which each consist of one city centre and a number of surrounding (rural) jurisdictions.The model has two levels of competition for mobile capital: first, cities simultaneously compete for mobile capital by setting their tax policies (which can be interpreted as competition for large scale investments, such as headquarters); second, rural areas compete simultaneously for capital within their metropolitan area (which corresponds to the neighbourhood competition).We are especially interested in the effects of a rise in the number of metropolitan regions, which represents the increase in external competition, for example through globalisation, Eastern enlargement of the EU or German unification. It is shown thatsimilarly to standard models -the capital tax rates of the cities converge to zero, but they stay positive for the hinterlands. Moreover, cities are more affected by an increase in external competition than hinterlands, since they reduce capital tax rates more and shift more from mobile capital to immobile labour taxation. In contrast to existing models, our results imply that larger jurisdictions do not necessarily rely mor...

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Section: Survey Description and Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

Janeba

Osterloh

2012

SSRN Journal

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“…In a variety of countries, one of the functions of regional authorities is provision of financial support to local budgets (Hauptmeier, Mittermaier, Rincke, 2012).…”

Section: Foreign Experience Of Using Subfederal Taxes As a Source Of mentioning

confidence: 99%

Subfederal Taxes as Sources of Budgets of State

Tyurina¹

2015

MJSS

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“…To that end, we analyze a two-stage game 4 . First, the governments choose the level of infrastructure non-cooperatively and then, set the tax rates.…”

Section: Competition In Taxes and Infrastructurementioning

confidence: 99%

Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition?

Han

Pieretti

Zou³

2013

SSRN Journal

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Many authors demonstrate that the tax gap resulting from tax competition increases with the size asymmetry of the competing countries. Consequently, increasing country-size disparities exacerbates the inefficiency of tax competition.The aim of this note is to show that this classical view has no general validity if we consider that countries compete not only in taxes but also in the provision of infrastructure. The simple model we develop for this purpose demonstrates that the effect of size disparity on efficiency depends crucially on the degree of international capital mobility.

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Fiscal competition over taxes and public inputs

Cited by 80 publications

References 27 publications

Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

Tax and the City - A Theory of Local Tax Competition and Evidence for Germany

Subfederal Taxes as Sources of Budgets of State

Does Size Asymmetry Exacerbate the Inefficiency of Tax Competition?

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