The growth and variability of local taxes: An application to the Italian regions

Raffaele Lagravinese, Paolo Liberati and Agnese Sacchi

No 1601, Working Papers. Collection B: Regional and sectoral economics from Universidade de Vigo, GEN - Governance and Economics research Network

Abstract: This paper investigates the short- and long-run responses of tax bases used by sub-central governments with regard to regional GDP. The methodology is applied to the two main taxes levied by the Italian regions over the period 2001-2012, the surtax on the personal income tax (RPIT) and the regional tax on productive activities (RTPA). Our results suggest that both tax bases do not exhibit long-run potential growth and that they are pro-cyclical. Furthermore, this pro-cyclicality is higher in the case of RTPA and during recession periods in all regions. The results cast some doubts on the adequacy of these two bases to provide an adequate financing source to provide health and other regional public services, normally highly demanded during business cycle contractions.

Keywords: Income elasticity; Regional tax bases; Error correction model; Italy (search for similar items in EconPapers)
JEL-codes: H24 H25 H77 R50 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-02
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:gov:wpregi:1601

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