Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany
39 Pages Posted: 10 Mar 2006 Last revised: 26 Aug 2008
There are 2 versions of this paper
Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany
Date Written: March 2006
Abstract
Recent literature has emphasized that redistributive grant systems may tend to internalize fiscal externalities arising from tax competition. This paper further explores the conditions under which local grant systems enforced by the state government will enhance efficiency. A system of redistributive grants among governments is introduced into a standard model of tax competition. This basic model is then extended in order to allow for variations in the government objectives at the state level. A subsequent empirical analysis of local tax policy exploits the experience with local fiscal revenue sharing in Germany. The results suggest that attempts of state level governments to extract fiscal resources from the local revenue sharing system exert an upward pressure on tax rates.
Keywords: Fiscal Equalization, Tax Competition, Fiscal Federalism
JEL Classification: H71, H77
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions
By Sam Bucovetsky and Michael Smart
-
The Incentive Effect of Fiscal Equalization Transfers on Tax Policy
-
The Fiscal Incentive Effects of the Australian Equalisation System
By Bev Dahlby and Neil Warren
-
Do Fiscal Transfers Alleviate Business Tax Competition? Evidence from Germany
By Peter H. Egger, Marko Koethenbuerger, ...
-
Competing in Taxes and Investment under Fiscal Equalization
By Jean Hindriks, Susana Peralta, ...
-
Competing in Taxes and Investment Under Fiscal Equalization
By Jean Hindriks, Susana Peralta, ...
-
Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany
By Thiess Buettner, Sebastian Hauptmeier, ...
