Tax policy and yardstick voting in Flemish municipal elections

Abstract

Recent theoretical papers develop political agency models in which voters compare tax policy with that in neighbouring jurisdictions. In these yardstick competition models voters judge incumbents by comparing their policy with policy in neighbouring jurisdictions. We analyse municipal elections in Flanders during the period 1982-2000 and find empirical evidence for yardstick voting. Incumbents are punished for higher tax rates. Importantly, the electoral punishment also depends on tax rates in neighbouring municipalities. Higher rates in neighbouring municipalities are favourable for the incumbents.