Advanced Search
MyIDEAS: Login to save this paper or follow this series

Business taxes and the electoral cycle

Contents:

Author Info

  • Foremny, Dirk
  • Riedel, Nadine

Abstract

The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/55267/1/685260577.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Hohenheim, Center for Research on Innovation and Services (FZID) in its series FZID Discussion Papers with number 43-2012.

as in new window
Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:zbw:fziddp:432012

Contact details of provider:
Postal: D-70593 Stuttgart
Phone: 0711-459-22476
Fax: 0711-459-23360
Email:
Web page: http://www.fzid.uni-hohenheim.de/
More information through EDIRC

Related research

Keywords: local business tax choice; political economy; election cycle;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  2. Buettner, Thiess, 2003. "Tax base effects and fiscal externalities of local capital taxation: evidence from a panel of German jurisdictions," Journal of Urban Economics, Elsevier, vol. 54(1), pages 110-128, July.
  3. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller & Doug Miller, 2009. "Robust Inference with Multi-way Clustering," Working Papers, University of California, Davis, Department of Economics 98, University of California, Davis, Department of Economics.
  4. Ronald Kneebone & Kenneth McKenzie, 2001. "Electoral and Partisan Cycles in Fiscal Policy: An Examination of Canadian Provinces," International Tax and Public Finance, Springer, Springer, vol. 8(5), pages 753-774, November.
  5. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  6. Matz Dahlberg & Eva Mörk, 2011. "Is There an Election Cycle in Public Employment? Separating Time Effects from Election Year Effects," CESifo Economic Studies, CESifo, CESifo, vol. 57(3), pages 480-498, September.
  7. Linda Veiga & Francisco Veiga, 2004. "Political business cycles at the municipal level," ERSA conference papers ersa04p427, European Regional Science Association.
  8. John Mikesell, 1978. "Election periods and state tax policy cycles," Public Choice, Springer, Springer, vol. 33(3), pages 99-106, January.
  9. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2010. "The Direct Incidence of Corporate Income Tax on Wages," IZA Discussion Papers 5293, Institute for the Study of Labor (IZA).
  10. Michael A. Nelson, 2000. "Electoral Cycles and the Politics of State Tax Policy," Public Finance Review, , , vol. 28(6), pages 540-560, November.
  11. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal and Vertical Indirect Tax Competition: Theory and Some Evidence From the USA," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4470, C.E.P.R. Discussion Papers.
  12. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  13. Lindbeck, Assar, 1976. "Stabilization Policy in Open Economies with Endogenous Politicians," American Economic Review, American Economic Association, American Economic Association, vol. 66(2), pages 1-19, May.
  14. Schuknecht, Ludger, 2000. " Fiscal Policy Cycles and Public Expenditure in Developing Countries," Public Choice, Springer, Springer, vol. 102(1-2), pages 115-30, January.
  15. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262510944, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Marcel Gérard & Laurent van Malderen, 2012. "Tax Interaction among Walloon Municipalities: Is there Room for Yardstick Competition, Intellectual Trend and Partisan Monopoly Effect?," CESifo Working Paper Series 4025, CESifo Group Munich.
  2. Maria Teresa Balaguer-Coll & María Isabel Brun-Martos & Anabel Forte & Emili Tortosa-Ausina, 2014. "Determinants of local governments'­ reelection: New evidence based on a Bayesian approach," Working Papers, Economics Department, Universitat Jaume I, Castellón (Spain) 2014/06, Economics Department, Universitat Jaume I, Castellón (Spain).
  3. Janeba, Eckhard & Osterloh, Steffen, 2013. "Tax and the city — A theory of local tax competition," Journal of Public Economics, Elsevier, Elsevier, vol. 106(C), pages 89-100.
  4. Antoine CAZALS & Alexandre Sauquet, 2013. "When does cooperation win and why? Political cycles and participation in international environmental agreements," Working Papers, HAL halshs-00903653, HAL.
  5. Laurent Van Malderen & Marcel Gérard, 2012. "Tax Interaction Among Walloon Municipalities: Is There Room For Partisan Monopoly Effect?," ERSA conference papers ersa12p1051, European Regional Science Association.
  6. Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2014. "Race to the debt trap? Spatial econometric evidence on debt in German municipalities," Discussion Papers 2014/1, Free University Berlin, School of Business & Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:fziddp:432012. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.