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Tax Decentralization and Public Deficits in OECD Countries

  • Thushyanthan Baskaran

This article explores the effect of sub-national tax autonomy and sub-national control over shared taxes on primary deficits with panel data for 23 OECD countries over the 1975--2000 period. The results suggest that sub-national tax autonomy has a U-shaped effect on primary deficits. We find that the "average" country in the sample could increase the fiscal stability of its public sector by reducing sub-national tax autonomy. There is also some indication that sub-national control over shared taxes increases fiscal stability, but we obtain this result only if Belgium and Spain are included in the sample. Copyright 2012, Oxford University Press.

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Article provided by Oxford University Press in its journal Publius: The Journal of Federalism.

Volume (Year): 42 (2012)
Issue (Month): 4 (October)
Pages: 688-707

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Handle: RePEc:oup:publus:v:42:y:2012:i:4:p:688-707
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