Tax Decentralization and Public Deficits in OECD Countries

Thushyanthan Baskaran

Publius: The Journal of Federalism, 2012, vol. 42, issue 4, 688-707

Abstract: This article explores the effect of sub-national tax autonomy and sub-national control over shared taxes on primary deficits with panel data for 23 OECD countries over the 1975--2000 period. The results suggest that sub-national tax autonomy has a U-shaped effect on primary deficits. We find that the "average" country in the sample could increase the fiscal stability of its public sector by reducing sub-national tax autonomy. There is also some indication that sub-national control over shared taxes increases fiscal stability, but we obtain this result only if Belgium and Spain are included in the sample. Copyright 2012, Oxford University Press.

Date: 2012
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Working Paper: Tax decentralization and public deficits in OECD countries (2011)
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