
Research
Publications in refereed journals
- « Local taxation and tax base mobility : Evidence from France », T. Ly, S. Paty,
Regional Science and Urban Economics, 2020.
Local taxation and tax base mobility : Evidence from France
Abstract
This paper investigates the impact of tax base mobility on local taxation. First, we develop a theoretical model in order to examine the connection between local business property taxation and tax base mobility within a metropolitan area. We and that, in the presence of a budget compensation, decreasing capital intensity in business property tax base, composed of capital and land, increases the business property tax rates and decreases the tax rates on residents. We test this result using a French reform which changed the composition of the main local business tax base in 2010. Difference-in-difference estimations show that in 2010, the reduction in tax base mobility indeed resulted in a 14% rise in business property tax rates and a reduction in housing tax rates of 1.3%, compared to pre-reform average levels.
- « Sub-metropolitan tax competition with mobile household and capital », T. Ly,
International Tax and Public Finance, 2018.
Sub-metropolitan tax competition with mobile household and capital
Abstract
This paper investigates the efficiency properties of tax competition between submetropolitan jurisdictions when capital, residents and workers are mobile, and both households and firms compete for local land markets. We analyze two decentralized equilibria: (1) with a local tax on residents and two separate local taxes on capital and land inputs, efficiency is achieved and the existence of a marginal fiscal cost due to residents’ mobility is revealed; (2) combination of the taxes on capital and land inputs into a single business property tax leads local authorities to charge inefficiently high taxation on capital. We show that capital mobility induces a reduction in the business land taxation and local public inputs are used to offset the distorting effects of the property tax, accounting for the distorting impact of workers’ mobility.
Working papers
- « A New Approach to Evaluating the Welfare Effects of Decentralized Policies », D.R. Agrawal, W.H. Hoyt, T. Ly,
Working paper, Job Market Paper
A New Approach to Evaluating the Welfare Effects of Decentralized Policies
Abstract
We establish a framework to quantify the welfare effects of decentralized policies. Local policies result in benefit-spillovers, mobility of households and firms, and interjurisdictional fiscal externalities that are not internalized by the government enacting the policy. Their magnitudes are measured by a new metric, the « marginal corrective transfer » (MCT), the share of funding the federal government should provide to induce a locality to internalize these interjurisdictional externalities. Formally, the MCT is estimated as the wedge between the marginal value of public funds (MVPF) of the locality enacting the policy and the MVPF of the entire federation. To calculate this wedge, we develop a rigorous framework for distinguishing between the benefits and costs that are internal and those that are external to the enacting locality. The MCT enables comparisons of local policies, allowing the federal government to prioritize policies based on the relative external benefits and costs.
Empirically, we show that property tax cuts, K-12 education, and higher education have positive MCT’s, implying federal subsidies should be employed while race-to-the-bottom type policies such as wealth tax cuts and bidding-for-firm programs with negative MCTs should be federally taxed. Depending on the taxing instruments utilized at the state level, we show if states rank policies to intervene on, they may diverge substantially from the federal government and from other states.
Presented at the NBER conference on tax competition
- « Ownership incentives and housing affordability: Evidence from France », S. Chareyron, T.Ly, Y.Trouvé-Sargison, Working paper
Ownership incentives and housing affordability: Evidence from France
Abstract
Are ownership incentive policies inevitably accompanied by detrimental inflationary effects?
To address this issue, we develop a theoretical model in which owners of new housing benefit from a homeownership subsidy or a rental investment incentive. We show that while both incentives increase the price of the new housing, they reduce old housing prices and have an ambiguous impact on the average housing price. These effects result from residential spillovers from the old housing market to the new housing market. We test these findings empirically by exploiting a 2014 French reform in the metropolitan area of Lyon which intensified both incentives. Difference-in-difference estimates confirm our theoretical predictions: two years after the reform, the price of new housing increased by 30% and the price of old housing decreased by 7%. Taking both markets together, the overall effect is non-significant. The share of new housing transactions increased by 25%.
- « The Welfare Effects of a Minimum Tax and Tax Competition », D.R. Agrawal, R. Parchet, T. Ly, Working paper
The Welfare Effects of a Minimum Tax and Tax Competition
Abstract
Tax administration is costly and may discourage some governments from utilizing certain taxes, thus becoming tax havens on those particular tax bases. This paper studies the welfare implications of strategic tax setting in the presence of such zero-tax jurisdictions. We develop a tax competition model in which jurisdictions decide whether or not to levy a tax and decide the optimal tax rate to compete for mobile factors. We apply our model to U.S. county sales taxes where 40% of jurisdictions do not levy a sales tax. We investigate the welfare effect of introducing a minimum tax that would require all zero-tax jurisdictions to set a positive tax rate, taking into account the endogenous response of the taxing jurisdictions.
- « Taxes, commuting and spillover in the metropolis », T. Ly, Working Paper
Taxes, commuting and spillover in the metropolis
Abstract
This paper studies local governments’ public policies in a metropolitan area plagued by traffic congestion, where both residents and workers consume local public goods.
We develop a new spatial sub-metropolitan tax competition model which features a central city surrounded by suburban towns linked by mobile capital and mobile residents who commute to work.
We show that Pareto-efficiency is achieved if towns can retain their workers using labor subsidies.
Otherwise, traffic congestion in the city is inefficiently high and local governments respond by setting inefficient public policies:
(1) the city over-taxes capital and under-taxes residents, which leads to too little capital and too many residents in the city;
(2) local public goods are under-provided in the city and over-provided in the towns.
- « Fourniture de biens publics en présence de préférences altruistes : une approche redistributive avec sélection adverse« , T. Ly, HAL., 2014
Fourniture de biens publics en présence de préférences altruistes : une approche redistributive avec sélection adverse
Abstract
Cette étude porte un nouvel éclairage sur la fourniture d’un bien par une autorité publique à des agents ayant des préférences altruistes. Elle repose sur une généralisation du modèle de Besley et Coate (2002). Il y est montré que lorsque le niveau d’altruisme relatif est une information privée des agents, une interprétation de ce paramètre plus précise que celle qui en est communément faite doit être effectuée. L’altruisme relatif mesure la manière dont un agent perçoit sa situation relativement à celle d’autrui. Ainsi, afin de pallier son manque d’information, le gouvernement doit favoriser d’autant plus un agent qu’il a un niveau d’altruisme éloigné du niveau moyen. Il est également montré que lorsque le régulateur n’observe pas le type des agents, il est contraint à un arbitrage entre équité et efficacité. Sa règle de provision optimale doit donc tenir compte non seulement des préférences des agents mais également des inégalités que cette politique peut générer.
Work in progress
- « Competition for greener regions: environmental policy and agglomeration », T. Ly, R. Gaté, S. Legras
Competition for greener regions: environmental policy and agglomeration
Abstract
This paper studies the effects of environmental policy competition among regional governments on pollution emission levels. We build a theoretical model including two regions with asymmetric agglomeration economies that implement an environmental policy fostering use of low-carbon transport mode. We show evidence of a key interplay between attractiveness, tax collection costs and aggregate pollution. A city benefiting from stronger agglomeration economies suffers from too much pollution emissions. However, fiscal competition prevents the region with lower agglomeration economies from being greener than the larger region.
- « Sorting, tax competition and the rise of local tax heavens », T. Ly, R. Parchet
Sorting, tax competition and the rise of local tax heavens
Abstract
This paper develops an income tax competition model in which mobile households are heterogeneous in income.We address the following questions: (i) Which balancing forces provide competing local governments with incentives to host households with heterogeneous income in their jurisdictions; (ii) Does tax competition among local governments amplifies or dampens the income sorting effects of amenity chocs? We identify necessary conditions for the existence of a general equilibrium. Our simulations show that a positive amenity choc in a jurisdiction disproportionately attracts richer households. This spurs its local government to provide more public good and increase its tax rate, which further attracts richer households. Public good provision increases more than the tax rate.
- « The impact of tax sharing agreements on local fiscal policy: Evidence from the Fonds des Frontaliers Luxembourgeois », T. Ly, S. Ramboer (VATT Inst. for Economic Research)
The impact of tax sharing agreements on local fiscal policy: Evidence from the Fonds des Frontaliers Luxembourgeois
Abstract
This paper examines how a tax revenue sharing scheme between Belgium and Luxembourg changed local fiscal policy in the border region. A large share of Luxembourg’s labour force consists of commuters living in Belgium. According to the countries’ double tax treaty, the income of cross-border commuters is taxed only in the state of source. As a result, also Belgian municipalities are prevented from levying income taxes, a main source of municipal revenue. In compensation however, the “Fonds des Frontaliers” was established in 2004.
To determine whether the resulting grants to Belgian municipalities internalized the fiscal externality and supported growth in the region, this paper utilized detailed data on municipal accounts and commuting flows. The identification strategy exploits the introduction as well as a reform of the fund and encompasses a range of differencein-differences analyses comparing compensated municipalities to similar control municipalities.
Preliminary results suggest the fund succeeded in internalizing externalities by reducing tax pressure on non-commuters and supporting investment in transport infrastructure while shoring up the capacity of public administration, education and social services.
Awards
- Graduate Student Paper Award of the North American Regional Science Council (NARSC)
- PhD First Prize of the French Economic Association (AFSE)

The 2019 AFSE PhD Prize has been awarded to Tidiane Ly for his thesis entitled “Tax competition within Metropolitan areas”, conducted at the University of Lyon 2 under the supervision of Florence Goffette-Nagot and Sonia Paty. The jury was really impressed by the originality, the quality and the rigor of the work carried out. The jury also greatly appreciated Tidiane’s wish to provide policy recommendations from his theoretical investigations and findings. Indeed, his thesis helps municipalities and lower-level jurisdictions in their policy instrument choice, and suggests that reforming the local institutional context requires to account for the specific responses of local governments.
Conferences & Presentations
- NBER Conference on Economic Impacts of Interjurisdictional Tax Competition, January 2022
- Annual Congress of the International Institute of Public Finance, (IIPF) July 2021, online
- 20th Journees Louis-Andrée Gérard-Varet (LAGV), June 2021, Marseille, France
- Swiss Society of Economics and Statistics (SSES) Annual Congress, June 2021, online
- Invited Seminar – Geographical economics, INRAE, april 2021, online
- Workshop on Local Public Finance and Regional Economic, 2020, Berne, Switzerland
- Annual Meeting of the National Tax Association (NTA), november 2019, Tampa, USA
- Annual Meeting of the North American Regional Science Council (NARSC), november 2019, Pittsburgh, USA
- Invited Seminar Cesaer, INRA october 2019, Dijon, France
- Annual Meeting of the French Economic Association (AFSE), june 2019, Orléans, France
- Workshop on economics of taxation and public expenditures, june 2019, Barcelona, Spain
- Swiss workshop on local public finance and regional economics, may 2019, Lugano, Switzerland
- Invited Seminar Università della Svizzera italiana, november 2018, Lugano, Switzerland
- Public Economics at the Regional Level (PEARL) workshop, september 2018, Zermatt, Switzerland
- European Public Choice Society conference, april 2018, Roma, Italia
- « Sorting, tax competition and the rise of local tax heavens », T. Ly, R. Parchet