*Names in bold indicate Presenter
This study adopts the framework used in the horizontal tax competition literature (see Brueckner (2003) for a review) to model the strategic interaction between overlapping local governments. Using a panel instrumental variables approach to identify the county property levy, I test whether the school districts strategically choose their own levy in response to county fiscal policy. Initial results indicate that strategic interaction generates a positive yard-stick effect for the school districts. This suggests that county tax increases do not crowd out school financing, but instead may provide a signal that the schools may also be able to raise their property levies. Additionally, the first stage results of the analysis provide estimates of the relationship between growth in employee health benefit expenditures and the level of property taxation.
- Strategic Interaction for SSRN.pdf (477.8KB)