Fiscal competition and public debt

verfasst von

Eckhard Janeba, Maximilian Todtenhaupt

Abstract

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.

Externe Organisation(en)

Universität Mannheim
Münchener Gesellschaft zur Förderung der Wirtschaftswissenschaft - CESifo GmbH
Norwegian School of Economics (NHH)
Ludwig-Maximilians-Universität München (LMU)
Zentrum für Europäische Wirtschaftsforschung GmbH (ZEW) Mannheim

Typ

Artikel

Journal

Journal of public economics

Band

168

Seiten

47-61

Anzahl der Seiten

15

ISSN

0047-2727

Publikationsdatum

12.2018

Publikationsstatus

Veröffentlicht

Peer-reviewed

Ja

ASJC Scopus Sachgebiete

Finanzwesen, Volkswirtschaftslehre und Ökonometrie

Ziele für nachhaltige Entwicklung

SDG 9 – Industrie, Innovation und Infrastruktur

Elektronische Version(en)

https://doi.org/10.1016/j.jpubeco.2018.10.001 (Zugang: Offen)