This paper explores the conditions under which decentralization and fiscal competition lead to a policy of subsidizing cultural activities. A theoretical analysis discusses these subsidies as a form of local public good provision which makes a city more attractive to highly educated individuals....

Many policy reforms are introduced with a significant lag between the time of legislative passage and their actual implementation. This is also the case for a new constitutional rule in Germany, referred to as a debt brake (Schuldenbremse), which requires the federal and state governments to run...

This paper models the optimal division of public goods provision between central and regional governments in an economy with interregional tax competition. Regional provision is inefficient because governments compete for scarce capital by lowering their capital taxes and public good levels to...

This paper analyzes the effects of trade liberalisation on the political support for policies that redistribute income between workers in different sectors. We allow for worker heterogeneity and imperfect mobility of workers across sectors, giving rise to a trade-off between redistribution and...

This paper reviews and extends recent attempts to better understand fiscal policy decision-making. Surveys of politicians are complementary to traditional empirical analyses and can be used to extract beliefs of policymakers. There is much heterogeneity across and also within parties. Often...

Considering data for individual earnings we show that the local subsidization of cultural activities in Germany exerts effects on the wage distribution in the sense that these subsidies tend to reduce the wage gap between those with higher and less education. These findings motivate a...

In the presence of international-capital mobility foreign direct investment is influenced by corporate income taxation and the rules how taxes paid in the host country are treated at home. In this paper the exemption, credit and deduction method are considered as tax rules. First, it is shown...

Despite the well-developed empirical literature on local tax competition, little is known about the actual spatial structure of inter-municipal competition. Assuming that competition takes place only among neighbours (as in the empirical literature) is at odds with the theoretical approaches...

Fiscal rules have become popular to limit deficits and high debt burdens in industrialized countries. A growing literature examines their impact based on aggregate fiscal performance. So far, no evidence exists on how fiscal rules influence deficit expectations of fiscal policy makers. In the...