The effect of electricity taxation on the German manufacturing sector: A regression discontinuity approach

Florens Flues and Benjamin Lutz

No 15-013, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Germany taxes electricity use since 1999. The government granted reduced rates to energy intensive firms in the industrial sector for addressing potentially adverse effects on firms' competitiveness. Firms that use more electricity than certain thresholds established by legislation, pay reduced marginal tax rates. As a consequence, the marginal tax rate is a deterministic and discontinuous function of electricity use. We identify and estimate the causal effects of these reduced marginal tax rates on the economic performance of firms using a regression discontinuity design. Our econometric analysis relies on official micro-data at the plant and firm level collected by the German Federal Statistical Office that cover the whole manufacturing sector. We do not find any systematic, statistically significant effects of the electricity tax on firms' turnover, exports, value added, investment and employment. The results suggest that eliminating the reduced marginal electricity tax rates could increase revenues for the government without adversely affecting firms' economic performance.

Keywords: Efficiency of Environmental Taxes; Control of Externalities; Regression Discontinuity Design (search for similar items in EconPapers)
JEL-codes: D22 H21 H23 Q41 Q48 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-eur, nep-mfd, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:15013

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