In assessing the desirability for tax decentralization reforms, a dilemma between efficiency and redistribution emerges. By limiting the ability of the central government to redistribute resources towards regions in financial needs, decentralization curbs incentives for excessive subnational...

Federal states in Germany are characterized by low fiscal autonomy. Equalization systems in place balance revenue differences to a considerable extent and states cannot independently set taxes of any major relevance. Although these features of German federalism are notorious for their...

This paper analyzes the efficiency consequences of local revenue policies if jurisdictions try to attenuate the pressures of inter-regional competition for mobile factors by substituting attention-grabbing tax instruments that spotlight an additional tax burden with rather inconspicuous ones. We...

In this paper, commuting is introduced to a federal economy where benevolent lower-level (state) governments levy an ad valorem tax on labour income. This results in inefficiently low levels of taxation, even when households as a whole do not migrate. Indeed, rather than attracting more workers...

The identification of strategic interactions among local governments is typically plagued by endogeneity problems. This paper proposes a quasi-experimental strategy to identify independent personal income tax setting by Swiss municipalities making use of the multi-tier federal system. State...