Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/185800
Authors: 
Kuhlmey, Florian
Year of Publication: 
2017
Series/Report no.: 
WWZ Working Paper 2017/18
Abstract: 
Income and property taxation are among the most prevalent policy instruments to finance local expenditure in countries with a high degree of decentralization. However, little is known about their relative efficiency and redistributive properties. This paper compares both tax instruments within the same framework and investigates their relative attractiveness to finance local expenditure. It further allows for inter-municipal spillovers and rivalry in the consumption of the publicly provided good. The analytical model identifies the different inefficiencies in both tax regimes which include intra- and inter- municipal free-riding. In a numerical illustration, the model is solved for the resulting equilibria. This allows to quantify the gross welfare loss from decentralization and also reveals a decomposition of the welfare loss into its components.
Subjects: 
tax competition
normative analysis
income taxation
property taxation
segregation
decentralization
welfare decomposition
JEL: 
H3
H7
R1
R2
Document Type: 
Working Paper
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