nep-pub New Economics Papers
on Public Finance
Issue of 2010‒03‒13
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Do Governments Tax Agglomeration Rents? By Hyun-Ju Koh; Nadine Riedel
  2. Fiscal decentralization and intergovernmental grants: the European regional policy and Spanish autonomous regions By Juan González Alegre
  3. The effects of tax incentives for small firms on employment levels By Corseuil, Carlos Henrique L.; Moura, Rodrigo Leandro de.

  1. By: Hyun-Ju Koh (University of Munich,); Nadine Riedel (Oxford University Centre for Business Taxation, CESifo Munich)
    Abstract: Using the German local business tax as a testing ground, we empirically investigate the impact of firm agglomeration on municipal tax setting behavior. The analysis exploits a rich data source on the population of German firms to construct detailed measures for the communities' agglomeration characteristics. The findings indicate that urbanization and localization economies exert a positive impact on the jurisdictional tax rate choice which confirms predictions of the theoretical New Economic Geography (NEG) literature. Further analysis suggests a qualification of the NEG argument by showing that a municipality's potential to tax agglomeration rents depends on its firm and industry agglomeration relative to neighboring communities. To account for potential endogeneity problems, our analysis exploits long-lagged population and infrastructure variables as instruments for the agglomeration measures.
    Keywords: Agglomeration Rents, Corporate Taxation, Regional Differentiation
    JEL: H73 R12
    Date: 2010
  2. By: Juan González Alegre (Universidad Pablo de Olavide)
    Abstract: Most of the Structural Actions are designed as an incentive to increase public investment in less-developed areas. However, we suspect that the efficiency of the policy is related to the level of fiscal autonomy of the subsidized government. In this paper we construct a paned data model in order to estimate the role of fiscal federalism on the effectiveness of the EU Structural Actions in enhancing public investment. We use data from the seventeen Spanish regions for the period 1993-2007. The estimation is run upon three alternative strategies: firstly we break the sample according to the level of fiscal autonomy of the units; secondly, we insert an interaction term capturing the join effect of both variables, fiscal decentralization and EU Structural Actions; finally, we estimate a simultaneous equation model in which public investment and the EU transfers are decided simultaneously. Results unambiguously support the hypothesis that the effectiveness of the Structural Funds decreases with larger decentralization. Our results suggest also that this could be due to the fact that regions find it more difficult to be eligible for additional EUSF as they gain fiscal autonomy. The general conclusions include the recommendation that the future design of the European Cohesion policy should take into account the heterogeneity of Fiscal Federalism across the Member States in order to the get the most out of it.
    Keywords: fiscal federalism, intergovernmental grants, European Union, regional policy, panel data, simultaneous equations for panels
    JEL: H72 H77 C33 C23
    Date: 2010
  3. By: Corseuil, Carlos Henrique L.; Moura, Rodrigo Leandro de.
    Abstract: This paper will examine the effects of tax incentives for small businesseson employment level evaluating a program with this purpose implemented in Brazil in the 1990s. We first develop a theoretical framework which guides both the de nition of the parameters of interest and their identi cation. Selection problems both into the treatment group and into the data sampleare tackled by combining fi xed effects methods and regression discontinuity design on alternative sub-samples of a longitudinal database of manufacturing fi rms. The results show that on the one hand the size composition of thetreated fi rms may be changed due to the survival of some smaller fi rms that would have exited had it not been eligible to the program. On the other hand, the treated fi rms who do not depend on the program to survive do employ more workers.
    Date: 2010–02–22

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