Do Local Governments Engage in Strategic Property-Tax Competition?

By Jan K. Brueckner, L. Saavedra. 2000

498 citations recorded by the source corpus.

This paper uses spatial econometric methods to investigate property-tax competition among local governments. The theoretical model is drawn from the literature on tax competition, in which local jurisdictions choose property-tax rates taking into account the migration of mobile capital in response to tax differentials. Using a "spatial lag" econometric model, the paper estimates the reaction function of the representative community, which relates the community's property-tax rate to its own characteristics and to the tax rates in competing communities. A nonzero reaction-function slope indicates the presence of strategic interaction in the choice of tax rates. The estimation uses cross-section data on property taxes and other socio-economic variables for cities in the Boston metropolitan area. The results, which are presented for two periods before and after imposition of Proposition 2 1/2 (a tax limitation measure), indicate the presence of strategic interaction.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/417f968503623402b15cbf98f60a664185d9c3b8

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Citations in the corpus

Tax competition among local governments: Evidence from a property tax reform in Finland (2012, unknown): “For the purposes of empirical work on local taxes it is important to note that strategic tax competition among jurisdictions in the same region requires that capital is not fully mobile but to some extent ﬁ xed to the region (Brueckner and Saavedra, 2001).”
WHAT DO WE KNOW ABOUT CORPORATE TAX COMPETITION? (2013, background): “…(2001, 2003)), Belgian municipalities (Heyndels and Vuchelen (1998)), and municipalities in British Columbia (Brett and Pinkse (2000)), Boston (Brueckner and Saavedra (2001), Milan (Bordignon, et al. (2003)), Barcelona (Solé-Ollé (2003)) and dutch municipalities (Allers and Elhorst (2005).”
Public spending interactions and local politics. Empirical evidence from French municipalities (2008, methodology): “…2005, in Switzerland; Bordignon et al. 2003, in Italy; Solé-Ollé 2003, in Spain, and Feld et al. 2002, in France), as well as using US States and Canadian provincial datasets (for example Brett and Pinske 2000, in Canada or Brueckner and Saavedra 2001, or Shughart and Tollison 1991, in the US).”
Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain (2006, background): “3 These papers can be included within a broader strand of empirical literature analyzing strategic interactions subnational governments (see Brueckner [12] for a survey), but most of them focus on tax interactions (Besley a [5], Brett and Pinkse [11], Buettner, [14] and Brueckner and Saavedra [13]) ”
Fiscal Interactions Among European Countries: Does the EU Matter? (2007, unknown): “Examples of this approach can be found in Brueckner (1998), Saavedra (2001) and Brueckner and Saavedra (2001).”
Functional-coefficient spatial autoregressive models with nonparametric spatial weights (2016, methodology): “Tax competition models (e.g., Brett and Pinkse, 2000; Brueckner and Saavedra, 2001) are taken as a well-known example in the resource- ow model framework, while public expenditure spillover in Case et al. (1993) and economic growth spillover in Er- tur and Koch (2007) are examples in the spillover…”
Strategic interaction in political competition: Evidence from spatial effects across Chinese cities (2016, methodology): “This method allows multiple 5Other studies on tax competition include Besley and Case (1995), Besley and Smart (2007), Bosch and Solé-Ollé (2007), Brueckner and Saavedra (2001), Edwards and Keen (1996), Buettner (2001), Devereux et al. (2007), Hayashi and Boadway (2001), Revelli (2006), and Rork…”