This paper deals with the question, whether in a federal state the regions should obtain the right to levy regional income taxes. It is shown that a revenue sharing system influences the optimal income tax rates and causes distortions. In a federal system with other distorting taxes, several...

What are the macroeconomic effects of tax adjustments in response to large public debt shocks in highly integrated economies? The answer from standard closed-economy models is deceptive, because they underestimate the elasticity of capital tax revenues and ignore crosscountry spillovers of tax...

Europe's debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore cross-country tax externalities. In contrast, we study tax responses to debt...

This paper is concerned with a policy oriented macroeconomic experiment involving an 'international' economy with a relatively small 'home' country and a large 'foreign' country. It compares the economic performance of two alternative tax systems as a means to finance unemployment benefits: a...

This paper is concerned with a policy oriented macroeconomic experiment involving an international economy with a relatively small home country and a large foreign country. It compares the economic performance of two alternative tax systems as a means to finance unemployment benefits: a...