Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273392 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
ZEW Discussion Papers No. 23-012
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
This paper examines how municipal taxes respond to the local impact of a labor market shock. The analysis exploits a commuting policy that liberalized cross-border labor markets between Switzerland and the EU. The reform was implemented at a time of skilled labor shortages and led to a substantial inflow of cross-border workers into Swiss border municipalities. Identification rests on exogenous regional variation in treatment intensities based on commuting times. The results show that corporate tax changes are significantly larger than zero in highly-treated border municipalities after the reform and when compared to less-affected regions. This is consistent with the theory according to which governments can tax rents that arise from productive location factors - an interpretation supported by several model extensions and robustness tests. The results on personal income taxation indicate a similar yet smaller and lagged response.
Subjects: 
productive amenities
agglomeration
cross-border commuting
skill shortage
tax competition
Swiss-EU agreement
JEL: 
H71
R23
J61
Document Type: 
Working Paper

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