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original: Welfare effects of regional income taxes Results of an interregional CGE analysis for Germany

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  • Georg Hirte

    (Department of Business Administration, Catholic University of EichstÄtt, Auf der Schanz 49, D-85051 Ingolstadt, Germany)

Abstract

This paper deals with the question, whether in a federal state the regions should obtain the right to levy regional income taxes. It is shown that a revenue sharing system influences the optimal income tax rates and causes distortions. In a federal system with other distorting taxes, several states and a revenue sharing system the welfare effects of regional income taxes can be positive or negative due to second best problems. Therefore the welfare effects of regional income taxes are computed by means of an interregional computable general equilibrium analysis (CGE). The results suggest that in the German federal economy the sign of the welfare effects of the introduction of regional income taxes is very sensitive to the particular institutional arrangements.

Suggested Citation

  • Georg Hirte, 1998. "original: Welfare effects of regional income taxes Results of an interregional CGE analysis for Germany," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 32(2), pages 201-219.
  • Handle: RePEc:spr:anresc:v:32:y:1998:i:2:p:201-219 Note: Received: February 1996 / Accepted in revised form: April 1997
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    1. Robert A. Leone & Raymond Struyk, 1976. "The Incubator Hypothesis: Evidence from Five SMSAs," Urban Studies, Urban Studies Journal Limited, vol. 13(3), pages 325-331, October.
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    Cited by:

    1. Patrizio Lecca & Peter G. McGregor & J. Kim Swales & Ya Ping Yin, 2014. "Balanced Budget Multipliers For Small Open Regions Within A Federal System: Evidence From The Scottish Variable Rate Of Income Tax," Journal of Regional Science, Wiley Blackwell, vol. 54(3), pages 402-421, June.
    2. Patrizio Lecca & Peter McGregor & Kim Swales & Ya Ping Yin, 2010. "Inverted Haavelmo Effects in a General Equilibrium Analysis of the Impact of Implementing the Scottish Variable Rate of Income Tax," Working Papers 1013, University of Strathclyde Business School, Department of Economics.

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