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Are incentive effects from fiscal equalization underestimated? Evidence from a Swiss reform

Nicola Mauri

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: This paper investigates incentive effects of fiscal equalization on local tax rates. I propose three refinements to current empirical estimations of these incentive effects. I show that local policy-makers may conceive changes in equalization transfers as stemming from discrete rather than marginal changes in the tax base, thus considering "supramarginal" equalization rates. Second, I study "effective" equalization rates which condition on the current tax rate. Third, I control for redistribution effects. I investigate the reform of an inter-municipal equalization scheme in Switzerland. My baseline estimate from supramarginal equalization rates is 2-3 times larger than found in previous studies.

Keywords: fiscal equalization; tax competition; local public; finance; fiscal federalism; regional science (search for similar items in EconPapers)
JEL-codes: H71 H77 R51 (search for similar items in EconPapers)
Pages: 53 pp.
Date: 2021-11
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:21.13

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