Tax Competition and Income Sorting: Evidence from the Zurich Metropolitan Area

CESifo Working Paper Series No. 2824

KOF Working Papers/KOF Swiss Economic Institute, ETH Zurich Paper No. 240, 2009

29 Pages Posted: 16 Oct 2009

See all articles by Christoph A. Schaltegger

Christoph A. Schaltegger

University of St. Gallen - CREMA

Frank Somogyi

Deutsche Bundesbank

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 20, 2009

Abstract

In this paper, we provide empirical evidence for the influence of income taxes on the choice of residence of taxpayers at the local level. The fact that Swiss communities can individually set tax multipliers thereby shifting the progressive tax scheme which is fixed at the cantonal (state) level enables us to study the effect of differences in income taxation on individuals’ choice of location within an economically and culturally homogeneous region. Using panel IV regressions covering the years 1991-2003 and 171 communities in the Swiss canton of Zurich and spatial error regressions for the 171 communities in 2003, we find substantial evidence for income sorting.

Keywords: tax competition, fiscal federalism, income segregation, income tax

JEL Classification: H71, H73, R5, R50

Suggested Citation

Schaltegger, Christoph A. and Somogyi, Frank and Sturm, Jan-Egbert, Tax Competition and Income Sorting: Evidence from the Zurich Metropolitan Area (October 20, 2009). CESifo Working Paper Series No. 2824 ; KOF Working Papers/KOF Swiss Economic Institute, ETH Zurich Paper No. 240, 2009. Available at SSRN: https://ssrn.com/abstract=1488081 or http://dx.doi.org/10.2139/ssrn.1488081

Christoph A. Schaltegger (Contact Author)

University of St. Gallen - CREMA ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Frank Somogyi

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

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