Tax Cuts Starve the Beast! Evidence from Germany

Daniel Stöhlker, Florian Neumeier () and Clemens Fuest

VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: This paper empirically evaluates how fiscal policy reacts to changes in the government's fiscal situation. Utilizing panel data from the German states covering the period from 1992 to 2011, we assess to what extent exogenous changes in tax revenues affect total public revenues, aggregate public expenditure as well as specific sub-categories of government spending. Applying the narrative approach pioneered by Romer and Romer (2010), we construct a measure of exogenous tax shocks, allowing us to identify the causal effect of tax changes on fiscal policy. Our findings indicate that tax changes trigger expenditure adjustments into the same direction after 2 to 3 years, specifically with respect to spending on governmental administration, health expenditures and spending on infrastructure.

Keywords: Taxation; Fiscal Policy; Tax-Spend; Public Expenditure; Narrative Approach (search for similar items in EconPapers)
JEL-codes: E62 H11 H20 H62 H72 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/181592/1/VfS-2018-pid-13732.pdf (application/pdf)

Related works:
Working Paper: Tax Cuts Starve the Beast! Evidence from Germany (2019)
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:zbw:vfsc18:181592

Access Statistics for this paper

More papers in VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().