How to stop the race to the bottom

Anna Rauch () and Caroline-Antonia Hummel ()
Additional contact information
Anna Rauch: University of Cologne
Caroline-Antonia Hummel: University of Cologne

International Tax and Public Finance, 2016, vol. 23, issue 5, No 7, 933 pages

Abstract: Abstract Standard tax multipliers are a widespread feature of fiscal equalization systems. A simple theoretical model shows that actual tax multipliers respond positively to changes in standard tax multipliers. This theoretical prediction is tested empirically using data on municipalities in Germany. A quasi-experiment in the state of North Rhine-Westphalia is exploited to identify the incentive effect. The empirical results confirm that local business tax policy is shaped by standard tax multipliers. They provide a straightforward practical tool to avoid a race to the bottom in local business tax rates.

Keywords: Fiscal equalization; Quasi-experiment; Local taxation; Business tax; Fiscal competition (search for similar items in EconPapers)
JEL-codes: H25 H71 H77 R51 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://link.springer.com/10.1007/s10797-015-9387-7 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
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: https://EconPapers.repec.org/RePEc:kap:itaxpf:v:23:y:2016:i:5:d:10.1007_s10797-015-9387-7

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/10797/PS2

DOI: 10.1007/s10797-015-9387-7

Access Statistics for this article

International Tax and Public Finance is currently edited by Ronald B. Davies and Kimberly Scharf

More articles in International Tax and Public Finance from Springer, International Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().