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Title:Do fiscal transfers alleviate business tax competition?: evidence from Germany PDF Logo
Authors:Egger, Peter
Koethenbuerger, Marko
Smart, Michael
Issue Date:2007
Series/Report no.:CESifo working paper 1955
Abstract:The paper empirically analyzes the incentive effects of equalizing transfers on business tax policy by exploiting a natural experiment in the state of Lower Saxony which changed its equalization formula as of 1999. We resort to within-state and across-state difference-indifference estimates to identify the reform effect on municipalities' business tax rates. Confirming the theoretical prediction, the reform had a significant impact on the municipalities’ tax policy in the four years after the reform with a “phasing out” of the effect starting in the fourth to fifth year. The finding is robust to various alternative specifications.
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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