Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany

Thiess Buettner (), Sebastian Hauptmeier and Robert Schwager

No 06-13, ZEW Discussion Papers from ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research

Abstract: Recent literature has emphasized that redistributive grant systems may tend to internalize fiscal externalities arising from tax competition. This paper further explores the conditions under which local grant systems enforced by the state government will enhance efficiency. A system of redistributive grants among governments is introduced into a standard model of tax competition. This basic model is then extended in order to allow for variations in the government objectives at the state level. A subsequent empirical analysis of local tax policy exploits the experience with local fiscal revenue sharing in Germany. The results suggest that attempts of state level governments to extract fiscal resources from the local revenue sharing system exert an upward pressure on tax rates. --

Keywords: Fiscal Equalization; Tax Competition Fiscal Federalism; Germany (search for similar items in EconPapers)
JEL-codes: H77 H71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-ure
Date: 2006
View list of references View citations in EconPapers

Downloads: (external link)
http://econstor.eu/bitstream/10419/24205/1/dp06013.pdf (application/pdf)

Related works:
Working Paper: Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:zbw:zewdip:4592

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research
Contact information at EDIRC.
Series data maintained by ZBW - German National Library for Economics ().