TY  - RPRT
        AU  - Borck, Rainald
AU  - Caliendo, Marco
AU  - Steiner, Viktor
        TI  - Fiscal Competition and the Composition of Public Spending: Theory and Evidence
        PY  - 2006/Nov/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2428
        UR  - https://www.iza.org/publications/dp2428
        AB  - In this paper, we consider fiscal competition between jurisdictions. Capital taxes are used to finance a public input and two public goods, one which benefits mobile skilled workers and one which benefits immobile unskilled workers. We derive the jurisdictions’ reaction functions for different spending categories. We then estimate these reaction functions using data from German communities. Thereby we explicitly allow for a spatially lagged dependent variable and a possible spatial error dependence by applying a generalized spatial two-stage least squares (GS2SLS) procedure. The results show that there is significant interaction between spending of neighbouring counties in Germany.
        KW  - public spending
KW  - spatial econometrics
KW  - tax competition
KW  - capital skill complementarity
        ER  -