With the 2008 reform of business taxation (Unternehmensteuerreform 2008) a preferential treatment of retained earnings for non-incorporated companies was introduced: Earnings may be retained at a preferential tax rate (29.8%) and will be subjected to supplementary tax (26.4%) when they will be...

In this short note, we use data from different elections in the German state of North-Rhine Westphalia between 1975 and 2010 to show that the social democrats generally profit from higher voter turnout at the expense of the conservatives. We deal with the endogeneity of voter turnout by using...

We analyze a constitutional change in the German State of Bavaria where citizens, not politicians, granted themselves more say in politics at the local level through a constitutional initiative at the state level. This institutional setting allows us to focus on revealed preferences for direct...

In the German system of fiscal equalization Länder (States) with tax revenue below the average get payments from the Länder above the average. The difference between the average and the own tax revenue per capita will be compensated up to 75%. To prevent Länder from getting payments form...

One prediction of the calculus of voting is that electoral closeness positively affects turnout via a higher probability of one vote being decisive. I test this theory with data on all mayoral elections in the German state of Bavaria between 1946 and 2009. Importantly, I use constitutionally...

The role and influence of the finance minister within the cabinet are discussed with increasing prominence in the recent theoretical literature on the political economy of budget deficits. It is generally assumed that the spending ministers can raise their reputation purely with new or more...

We examine optimal taxation and social insurance if insurance markets are imperfect. This requires the development of a theory of labor supply under uncertainty. We show that the case for social insurance is not generally reinforced by adverse selection in insurance markets as social insurance...

I test if parties matter with respect to the allocation of public expenditures in Germany. Considering the allocation of rights and duties due to the federal structure, two econometric models are estimated. First, a SURE model analyses spending at the federal level for the period from 1950 to...

This paper examines the effects of political determinants on the allocation of public expenditures. Analyzing an OECD panel from 1990 to 2004, a SURE model controls for the contemporaneous correlation between the different expenditure categories (COFOG). I find that left governments set other...

This paper examines how policy affects social expenditures. Analyzing an OECD panel from 1980 to 2003, five political variables are tested: Election- and pre-election years, the ideological party composition of the governments, the number of coalition partners and the fact, if the ruling...