Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7242861 | Journal of Economic Behavior & Organization | 2016 | 24 Pages |
Abstract
This paper explores a striking form of tax policy interdependence that can be observed in the German federation. Though municipalities enjoy discretion in setting the local business tax rate, large fractions of municipalities - in some states even the majority - set identical tax rates. Our analysis shows that this tax-rate “bunching” is not the result of federal or state-level institutions. Possible explanations rest on partial coordination and yardstick competition. The role of the former is exemplified by the finding that small jurisdictions and jurisdictions sharing the same county are more likely to engage in “bunching”. Yardstick competition seems also relevant since jurisdictions for which strategic tax-setting should be associated with larger gains and lower cost are in fact more likely to set identical tax rates.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Thiess Buettner, Axel von Schwerin,