Tax mix corners and other kinks
AbstractThis paper models the local tax mix determination process in the presence of state-wide tax limitations and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat misleadingly called flypaper effect) arises in the endogenously generated constrained tax mix and cannot in general be taken as a symptom of local government overspending. By means of a panel data switching regression approach that allows for fixed effects and endogenous selection, the paper exploits the clustering of Italian Provinces at the corners produced by upper and lower tax limitations, and provides evidence of considerable cap-generated excess sensitivity.
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Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/50.
Length: 44 pages
Date of creation: 2010
Date of revision:
Flypaper effect; excess sensitivity; tax mix; switching regression; endogenous selection;
Other versions of this item:
- Revelli, Federico, 2010. "Tax mix corners and other kinks," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201017, University of Turin.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-01-30 (Accounting & Auditing)
- NEP-ALL-2011-01-30 (All new papers)
- NEP-PBE-2011-01-30 (Public Economics)
- NEP-URE-2011-01-30 (Urban & Real Estate Economics)
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.:
- Lars-Erik Borge & Per Tovmo, 2007.
"Myopic or constrained by balanced-budget-rules? The intertemporal spending behavior of Norwegian local governments,"
Working Paper Series
8807, Department of Economics, Norwegian University of Science and Technology.
- Lars-Erik Borge & Per Tovmo, 2009. "Myopic or Constrained by Balanced-Budget Rules? The Intertemporal Spending Behavior of Norwegian Local Governments," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 200-219, June.
- Federico Revelli, 2012.
"Business taxation and economic performance in hierarchical government structures,"
2012/12, Institut d'Economia de Barcelona (IEB).
- Revelli Federico, 2012. "Business taxation and economic performance in hierarchical government structures," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201204, University of Turin.
- Federico Revelli, 2013.
"Tax limits and local democracy,"
2013/29, Institut d'Economia de Barcelona (IEB).
- Revelli, Federico, 2013. "Tax Limits and Local Democracy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201336, University of Turin.
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