We study political determinants of municipality amalgamations during a boundary reform in the German state of Brandenburg, which reduced the number of municipalities from 1,489 to 421. The analysis is conducted using data on the political decision makers as well as fiscal and socio-economic...

This paper explores the interdependency of political institutions from the voter's perspective. Specifically, we are interested in three questions: (1) Does the partisan identity of the local mayor influence the voter's decision in the subsequent town council election?; (2) Does this partisan...

This paper provides empirical evidence on the party incumbency advantage in mayoral elections in Germany. Using a regression discontinuity design on a data set of about 25,000 elections, I estimate a causal incumbency effect of 38-40 percentage points in the probability of winning the next mayor...

Theoretical work based on social identity theory and in-group favoritism predicts that increased population diversity (e.g., due to immigration) reduces support for redistributive public policies. In this article, we add to the empirical literature testing this prediction in three ways. First,...

This paper estimates the effect of political power on tax policies in municipal councils under a proportional election system. The main challenge in estimating the causal effect of parties on policy is to isolate the effect of power from underlying voter preferences and the selection effect of...

Do incumbents in an election have an advantage, and if so, are these advantages heterogeneous across parties or government and opposition? We first present a theoretical discussion on the possible heterogeneity of incumbency effects in a pure two-party system. Then, we estimate the incumbency...

This study presents comprehensive macroeconomic measures on the revenue from business taxation in Germany. A comparison of the tax base reported in tax statistics with the corporate income derived from national accounts gives hints to considerable tax base erosion. The high weight of reported...

Tax competition for the mobile factor capital has led to a trend in many countries to levy lower taxes on interest income, often introducing differential taxation between interest and business income. In this study, we analyze the effect of such differential taxation on the debt ratio of firms....

In this study we investigate the impact of the thin capitalization rule (TCR), introduced in Germany in 2008, on firms' capital structure, investment and profitability. The identification of the causal effects is based on the escape clauses in the regulation using a difference-in-difference...

Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated...