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Testing for Vertical Fiscal Externalities Author info | Abstract | Publisher info | Download info | Related research | Statistics Linda Andersson ()
Thomas Aronsson ()
Magnus Wikstr–m ()
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The purpose of this paper is to design a test of whether the vertical external effects associated with tax base sharing among local and regional governments have become internalized via the intergovernmental transfer system. Such tests are important in the sense that the income tax rates chosen by different levels of government will generally be correlated, even if the resource allocation is optimal from society's point of view. By using panel data for the Swedish local and regional public sectors, the results imply that an increase in the regional income tax rate induces the municipalities in the region to decrease their income tax rates. In addition, we are able to reject the null hypothesis that the vertical external effects have become internalized.
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Article provided by Springer in its journal International Tax and Public Finance .
Volume (Year): 11 (2004)
Issue (Month): 3 (05)
Pages: 243-263
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Handle: RePEc:kap:itaxpf:v:11:y:2004:i:3:p:243-263Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915
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Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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