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Title:The Impact of Fiscal Equalization on Local Expenditure Policies: Theory and Evidence from Germany PDF Logo
Authors:Hauptmeier, Sebastian
Issue Date:2007
Series/Report no.:ZEW Discussion Papers 07-081
Abstract:This paper uses a simple model of fiscal competition in taxes and public inputs among local jurisdictions to analyze the incentive effects of fiscal equalization transfers. We find that a budget-compensated increase in the contribution rate to a system of fiscal equalization not only induces higher local tax rates (e.g., Koethenbuerger, 2002; Bucovetsky and Smart, 2006) but also lower budgetary shares of the public input to production. The subsequent empirical analysis is based on a rich data set of German municipalities and provides strong evidence for the existence of an incentive of fiscal equalization transfers on local expenditure policies.
Subjects:Fiscal competition
Fiscal equalization
Public inputs
Regression discontinuity approach
Germany
JEL:H77
H72
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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