Tiebout Competition, Yardstick Competition, and Tax Instrument Choice: Evidence from Ohio School Districts
Joshua C. Hall
West Virginia University
Justin M. Ross
Indiana University - School of Public & Environmental Affairs
January 5, 2010
Public Finance Review, Vol. 38, No. 6, pp. 710-737, 2010
Previous research has shown that Tiebout-style fiscal competition among local governments reduces the likelihood of adopting income taxes. This literature has not yet considered the impact of yardstick competition on tax instrument choice. This paper employs spatial econometrics to test for yardstick competition in the decision to adopt an income tax. The results, based on Ohio school district data, indicate that school districts are more likely to adopt an income tax if their neighbors have already done so. While a negative correlation of Tiebout competition on district income tax adoption persists, controlling for spatial dependence reduces the statistical significance of the effect.
Number of Pages in PDF File: 37
Keywords: interjurisdictional competition, tax structure, education finance
JEL Classification: H71
Date posted: December 15, 2010 ; Last revised: July 22, 2011
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