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Does Highway Accessibility Influence Local Tax Factors? Evidence from German Municipalities

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  • Luisa Dörr
  • Stefanie Gäbler

Abstract

We examine how highway accessibility influences tax policy. We exploit the stagewise expansion of the “Baltic Sea highway” in the East German state Mecklenburg-Western Pomerania as the largest contiguous highway construction project in Germany since 1945. For non-agglomeration municipalities that lie on a convenient route between two larger cities the access and opening year are close to random. Results from difference-in-differences estimations and an event study approach show that highway access influences local tax setting in municipalities within 5 to 10 km road distance. Improved accessibility increases property tax factors persistently by roughly 6 percentage points. Our effects are driven by peripheral municipalities, while we do not find an influence on core municipalities. Additionally, improved accessibility gives rise to a shift of population and economic activity from the periphery to the core.

Suggested Citation

  • Luisa Dörr & Stefanie Gäbler, 2020. "Does Highway Accessibility Influence Local Tax Factors? Evidence from German Municipalities," ifo Working Paper Series 321, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_321
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    More about this item

    Keywords

    Highway; infrastructure; accessibility; tax factors; municipalities; local governments;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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