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Title:Fiscal Competition and the Composition of Public Spending: Theory and Evidence PDF Logo
Authors:Borck, Rainald
Caliendo, Marco
Steiner, Viktor
Issue Date:2005
Series/Report no.:DIW-Diskussionspapiere 528
Abstract: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.
Subjects:Tax competition
capital skill complementarity
public spending
spatial econometrics
JEL:J61
J24
H77
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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