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Tiebout Competition, Yardstick Competition, and Tax Instrument Choice: Evidence from Ohio School Districts

Public Finance Review, Vol. 38, No. 6, pp. 710-737, 2010

37 Pages Posted: 15 Dec 2010 Last revised: 22 Jul 2011

Joshua C. Hall

West Virginia University

Justin M. Ross

Indiana University - School of Public & Environmental Affairs

Date Written: January 5, 2010

Abstract

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.

Keywords: interjurisdictional competition, tax structure, education finance

JEL Classification: H71

Suggested Citation

Hall, Joshua C. and Ross, Justin M., Tiebout Competition, Yardstick Competition, and Tax Instrument Choice: Evidence from Ohio School Districts (January 5, 2010). Public Finance Review, Vol. 38, No. 6, pp. 710-737, 2010. Available at SSRN: https://ssrn.com/abstract=1724682

Joshua C. Hall (Contact Author)

West Virginia University ( email )

Morgantown, WV 26506
United States

Justin M. Ross

Indiana University - School of Public & Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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