NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition

Timothy Besley, Anne Case

NBER Working Paper No. 4041
Issued in March 1992
NBER Program(s):   PE

This paper presents a theoretical and empirical investigation of tax competition when voters use the tax policy of neighboring jurisdictions as information to evaluate the performance of their incumbent politicians. We show that this has implications both for voter tolerance of high taxes and for the process of tax setting itself, Our empirical results, which use two different tax data sets, confirm the importance of neighbors' taxes both on the probability of incumbent reelection and on tax setting behavior.

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Document Object Identifier (DOI): 10.3386/w4041

Published: American Economic Review, Volume 85, No. 1, March 1995: pp. 25-45

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