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LEADERS, FOLLOWERS, AND ASYMMETRIC LOCAL TAX POLICY DIFFUSION
Author(s) -
Burge Gregory S.,
Rogers Cynthia L.
Publication year - 2016
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/jors.12242
Subject(s) - economics , construct (python library) , competition (biology) , tax competition , microeconomics , public economics , diffusion , index (typography) , tax policy , econometrics , international taxation , tax reform , computer science , ecology , world wide web , biology , programming language , physics , thermodynamics
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.