Taxing Our Neighbors? Why Some Sub-National Revenues Are So Small
This paper analyzes the determinants of local government revenues and the incentives faced by politicians in the design of tax policy. The decision of deepening local tax collections carries costs and benefits for local politicians. Balancing in the margin these costs and benefits allows for an endogenous determination of the taxing level. The paper stresses the role of markets size in determining politicians’ incentives to enact a tax regime. In addition, we provide a rationale for the central government-local government tax ratio as a key tax effort variable. Furthermore, local levels of income inequality are relevant in explaining tax collections.
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|Date of revision:||Mar 2010|
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- Kenneth L. Sokoloff & Eric M. Zolt, 2007. "Inequality and the Evolution of Institutions of Taxation: Evidence from the Economic History of the Americas," NBER Chapters, in: The Decline of Latin American Economies: Growth, Institutions, and Crises, pages 83-138 National Bureau of Economic Research, Inc.
- Alejandro Esteller-More, 2004.
"Tax Evasion in Interrelated Taxes,"
- Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
- Rebelo, S., 1998. "The Role of Knowledge and Capital in Economic Growth," Research Paper 149, World Institute for Development Economics Research.
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