Efficient Revenue Sharing and Upper-Level Governments: Theory and Application to Germany - 10.1628/jite-2011-0007 - Mohr Siebeck
Economics

Thiess Buettner, Robert Schwager, Sebastian Hauptmeier

Efficient Revenue Sharing and Upper-Level Governments: Theory and Application to Germany

Volume 167 () / Issue 4, pp. 647-667 (21)

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This paper explores conditions under which revenue-sharing grants will achieve efficiency. We develop a general formulation of the state's decision problem of implementing a set of local policies. A theoretical analysis shows that if the state government pursues own policies and cannot levy lump-sum contributions from local jurisdictions, it will implement revenue-sharing grants that induce local governments to raise local tax rates. A subsequent empirical analysis of local tax policy in Germany suggests that attempts by state-level governments to extract fiscal resources from local governments result in higher tax rates at the local level.
Authors/Editors

Thiess Buettner No current data available.

Robert Schwager No current data available.

Sebastian Hauptmeier No current data available.