In Search for Yardstick Competition: Property Tax Rates and Electoral Behavior in Italian Cities

29 Pages Posted: 21 Feb 2002

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Floriana Cerniglia

University of Milan, Bicocca - Faculty of Economics; Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Federico Revelli

University of Turin

Date Written: January 2002

Abstract

Do citizens engage in comparative performance evaluation across local governments? And if they do, how can we disentangle this behavior from other forms of strategic interactions among local governments or simple spatial correlation across neighboring jurisdictions? We use spatial econometrics techniques and the institutional characteristics of the Italian system to test if some theoretically derived predictions of yardstick competition theory are supported by data, estimating to this aim both a tax setting and a popularity equation. The results show that local tax rates are positively auto-correlated among neighboring jurisdictions when the mayors run for re-election, while this correlation is absent where either the mayors face a term limit or where they are backed by an overwhelming majority in the local council. Both results are in clear agreement with yardstick theory. On the other hand, the results of the estimation of the popularity equation are less supportive of the theory, possibly as a result of the difficulty in controlling for public service quality and the simultaneous setting of multiple policy instruments.

Keywords: Local Property Tax Setting, Yardstick Competition, Spatial Auto-correlation

JEL Classification: C51, D72, H71

Suggested Citation

Bordignon, Massimo and Cerniglia, Floriana and Revelli, Federico, In Search for Yardstick Competition: Property Tax Rates and Electoral Behavior in Italian Cities (January 2002). CESifo Working Paper Series No. 644, Available at SSRN: https://ssrn.com/abstract=301060

Massimo Bordignon (Contact Author)

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Floriana Cerniglia

University of Milan, Bicocca - Faculty of Economics ( email )

Italy

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Federico Revelli

University of Turin ( email )

Via Po 53
Facolta di Scienze Politiche
10124 Torino
Italy

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