Leaders, Followers, and Asymmetric Local Tax Policy Diffusion

19 Pages Posted: 7 Mar 2016

See all articles by Gregory Burge

Gregory Burge

University of Oklahoma

Cynthia Rogers

University of Oklahoma

Date Written: March 2016

Abstract

Complementing recent theoretical models of tax competition with endogenous leadership, we empirically model local policy diffusion as a dynamic asymmetric process. Using a setting where local option sales taxes rapidly transitioned from nonexistence to ubiquity, we construct a policy leadership index to classify jurisdictions as leaders or followers. Using models that control for vertical tax competition effects, we show how asymmetric leader–follower dynamics characterize horizontal tax competition over the three decades that follow. A placebo test further supports our main conclusions. This methodological approach could be adapted to other settings where policies exhibit both extensive and intensive margins.

Suggested Citation

Burge, Gregory and Rogers, Cynthia, Leaders, Followers, and Asymmetric Local Tax Policy Diffusion (March 2016). Journal of Regional Science, Vol. 56, Issue 2, pp. 313-331, 2016. Available at SSRN: https://ssrn.com/abstract=2742984 or http://dx.doi.org/10.1111/jors.12242

Gregory Burge (Contact Author)

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States

Cynthia Rogers

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States

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