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A Tax on Tax Revenue. The Incentive Effects of Equalizing Transfers: Evidence from Germany

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Listed:
  • Bernd Huber
  • Christian Baretti
  • Karl Lichtblau

Abstract

Several recent studies suggest that equalizing transfers in a federal system may distort the tax policy decisions of states. We study this issue for the German federal fiscal system. In a simple theoretical model, we first identify a substitution and an income effect of equalizing transfers. Our main hypothesis is that both effects should tend to reduce tax revenue of German states. We perform various empirical tests which confirm this hypothesis.

Suggested Citation

  • Bernd Huber & Christian Baretti & Karl Lichtblau, 2000. "A Tax on Tax Revenue. The Incentive Effects of Equalizing Transfers: Evidence from Germany," CESifo Working Paper Series 333, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_333
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp333.pdf
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    References listed on IDEAS

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    1. Massimo Bordignon & Paolo Manasse & Guido Tabellini, 2001. "Optimal Regional Redistribution under Asymmetric Information," American Economic Review, American Economic Association, vol. 91(3), pages 709-723, June.
    2. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    3. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
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    Cited by:

    1. Richard M Bird & Andrey V Tarasov, 2004. "Closing the gap: fiscal imbalances and intergovernmental transfers in developed federations," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 22(1), pages 77-102, February.
    2. Pablo Sanguinetti & Martin Besfamille, 2004. "Exerting local tax effort or lobbying for central transfers?: Evidence from Argentina," Econometric Society 2004 Latin American Meetings 249, Econometric Society.
    3. Torrisi, Gianpiero & Pike, Andy & Tomaney, John & Tselios, Vassilis, 2011. "Defining and measuring decentralisation: a critical review," MPRA Paper 51441, University Library of Munich, Germany.
    4. repec:agr:journl:v:3(612):y:2017:i:3(612):p:115-124 is not listed on IDEAS
    5. Santiago Lago Peñas, 2002. "Nivelación interterritorial e ineficiencia de las decisiones presupuestarias: reflexiones para el caso español," Hacienda Pública Española, IEF, vol. 162(3), pages 79-100, ¨Septembe.
    6. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2001. "Die Reform des Finanzausgleichs im Spannungsfeld zwischen ökonomischer Rationalität und Besitzstandsdenken," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft Köln (IW) / Cologne Institute for Economic Research, vol. 28(2), pages 38-58.
    7. Christian Baretti & Bernd Huber & Karl Lichtblau, 2001. "Das Maßstäbegesetz auf dem Prüfstand," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 54(11), pages 12-20, October.
    8. Lkhagvadorj, Ariunaa, 2010. "Fiscal Federalism and Decentralization in Mongolia," MPRA Paper 28758, University Library of Munich, Germany, revised Mar 2010.
    9. Robert Fenge & Jakob von Weizsäcker, 2000. "How Much Fiscal Equalisation?," CESifo Working Paper Series 366, CESifo Group Munich.
    10. Christian Baretti, 2002. "Wird gute Standortpolitik bestraft? Die Anreizeffekte des kommunalen Finanzsystems," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(07), pages 10-16, April.

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