Through an intertemporal budget constraint, jurisdictions may gain advantages in tax and spending competition by 'competing' on debt. While the existing spatial econometric literature focuses on tax and spending competition, very little is known about spatial interaction via public debt. This...

This paper discusses how local tax rates of the business tax are set when communities compete for capital as a mobile factor. In a theoretical model communities provide public inputs financed by a tax on capital income in order to maximize a general objective function, which includes residents'...

Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated...

We analyze the welfare implications of property taxation. Using a sufficient statistics approach, we show that the tax incidence depends on how housing prices, labor and other types of incomes as well as public services respond to property tax changes. Empirically, we exploit the German...

This paper is concerned with fiscal externalities arising from local taxation of a mobile factor. Using a panel of more 1100 local jurisdictions it provides empirical evidence on how the local tax rate as well as the tax rate in the neighborhood affect the local tax base. The results support the...