Martin Hulényi (p), Jan Fidrmuc, Nicolas Debarsy

Alessandro Cusimano

Borders constitute market barriers that hamper the development in the surrounding regions. But what happens in the regions in the vicinity ofborders once these barriers are reduced in the context of trade liberalization? To investigate this question, we use nighttime lights data to analyse municipalities in the proximity of borders affected by the 2004 and 2007 EU enlargements. Our preliminary results suggest that there is no difference in growth of nighttime lights (as a proxy of economic activity) between the municipalities located near these borders and municipalities located near the EU external borders. When differentiating between municipalities in the EU15 and New member states sides of the borders we find a positive impact in the former following the 2004 enlargement. The reason for the missing impact in the new member states might be the acceleration of agglomeration forces in these countries after their accession into the EU.

Ivo Bischoff, Reinhold Kosfeld (p), Sourav Das

Martin Hulényi

Inter-municipal cooperation (IMC) has become increasingly widespread in the indus-trialized world. IMC refers to the voluntary cooperation of municipalities in a distinctly defined set of one or more tasks while it preserves local autonomy in the other tasks. In practice, IMC-arrangements cover a wide spectrum of municipal tasks IMC enables local govern-ments to internalize spillovers and allows especially smaller jurisdictions to exploit economies of scale and scope in the jointly performed tasks.
Less attention has been paid to a possible downside of IMC: IMC creates a platform that facilitates the coordination of local policies among union-members that can be used for collusive purposes. In particular, this platform can be used to reduce the intensity of inter-local competition. Inter-local competition reduces the leeway of opportunistic governments and forces local governments to set low tax rates and provide high-quality infrastructure and services. If IMC leads to a reduction in inter-local competition, IMC may be harmful to economic growth.
So far, this downside of IMC has received little attention in the empirical literature. In the present study, we focus on inter-local industrial parks as a specific field of inter-municipal cooperation. We use data from four West-German states in the period 2000 – 2018 to investigate whether they are used as platforms to reduce inter-local competition. Inter-local industrial parks are a very good testing ground for a number of reasons. First, they require substantial joint investments and thus represent a strong commitment for long-term cooperation. Second, they are especially suitable for organizing tax coordination because they control important dimensions of the inter-local competition for mobile capital. If IMC is used as a tool to reduce inter-local competition, we expect to observed it for inter-local industrial parks. Finally, local business tax rates provide a clear-cut indicator for the intensity of inter-local competition.
We apply the generalized synthetic control method(SCM) to estimate the causal effect of inter-local industrial parks on local business tax rates. So far, this method has not been applied in studies on local tax-setting behavior . Moreover, we add to the still small body of studies that apply this method to a panel data set with multiple treatment and staggered treatment onset. Our analysis covers 38 inter-local industrial parks founded between 2005 and 2013 involving 117 municipalities in four West-German states. We show that significant effects on local tax rates occur under varying conditions in the states.

Elena Ragazzi (p), Giuseppe Giulio Calabrese, Greta Falavigna, Lisa Sella, Arianna Radin

Reinhold Kosfeld

This paper is based on the case of the ISI calls, a program giving incentives to SMEs for OSH investments promoted by Inail, the Italian national insurance institution. The ISI calls are implemented through the mechanism of the click-day, i.e. firms applying for funding apply in a precise time and are funded on a first-come first-served basis. Since the available funds are exhausted in a few minutes (or even seconds), the mechanism can be assimilated to a natural experiment, where the applicants that arrived too late to be funded represent our control group. So, this case study represents an unique evaluation setting, seen that the vast majority of interventions in OSH are in the form of overall regulation and lack then of a counterfactual. One of the evaluation challenges is represented by attrition, which can bias the observed impact if the variables causing the exit from treatment are correlated with the outcome variable. Our paper will focus on the analysis of firms that were selected by the click, which either did not present the required documentation, or did not realize the investment, or had some irregularity. We will start by a descriptive section showing how the phenomenon varies among years and company sizes. Then we will discuss why it happened based on the survival profile and on the economic and financial profile (for companies only) of the firms leaving the treatment respect to the firms that received the complete funding. This will give us hints on the possible direction of the bias caused by attrition.

Alessandro Cusimano (p), Chiara Paola Donegani, Eun Sun Godwin

Elena Ragazzi

In this work we estimate different dose-response functions linking FDI inflows received by a sample of developing countries with their economic growth. Although the impact of FDI on the economic growth of host countries has been widely investigated in literature, findings have been ambiguous. Our study proposes a novel ‘dose-response’ approach which allows the response of recipients to different amounts of treatment in terms of FDI inflow to be observed. The estimated dose-response functions are statistically significant for treatment values greater than 20%, after the treatment has been rescaled to a percentage measure of the maximum dose observed, and increasing at a decreasing rate, therefore indicating that: a) a country receiving a greater amount of FDI inflows will present a higher economic growth; b) there might be a minimum amount of FDI inflows required to reach some policy effectiveness; c) the initial amounts of FDI inflow are more effective than the subsequent ones, therefore reflecting the law of diminishing returns. Results are robust to different specifications and imply useful policy considerations.