Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26000 
Year of Publication: 
2007
Series/Report no.: 
CESifo Working Paper No. 1955
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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.
JEL: 
H71
H25
Document Type: 
Working Paper
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