Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24666
Authors: 
Hauptmeier, Sebastian
Year of Publication: 
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

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