Fiscal competition and public debt

• 成果类型: Article
• 署名作者: Janeba, Eckhard; Todtenhaupt, Maximilian
• 署名单位: University of Mannheim; Leibniz Association; Ifo Institut; Leibniz Association; Zentrum fur Europaische Wirtschaftsforschung (ZEW); Norwegian School of Economics (NHH); University of Munich
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2018.10.001
• 发表日期: 2018
• 页码: 47-61
• 关键词: Asymmetric tax competition; Business tax; Sovereign debt; Inter-jurisdictional tax competition

摘要

This paper explores the implications of high indebtedness for strategic tax setting when capital markets are integrated. When public borrowing is constrained due to sovereign default or by a binding fiscal rule, a rise in a country's initial debt level lowers investment in public infrastructure and makes tax setting more aggressive in that jurisdiction, while the opposite occurs elsewhere. On net a jurisdiction with higher initial debt becomes a less attractive location. Our analysis is inspired by fiscal responses in severely hit countries after the economic and financial crisis which are consistent with the theoretical predictions. We find a similar pattern on the sub-national level using administrative data from the universe of German municipalities. (C) 2018 Elsevier B.V. All rights reserved.