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The Annals of Regional Science

, Volume 32, Issue 2, pp 201–219 | Cite as

Welfare effects of regional income taxes Results of an interregional CGE analysis for Germany

Results of an interregional CGE analysis for Germany
  • Georg Hirte
Original

Abstract.

 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 states and a revenue sharing system the welfare effects of regional income taxes can be positive or negative due to second best problems. Therefore the welfare effects of regional income taxes are computed by means of an interregional computable general equilibrium analysis (CGE). The results suggest that in the German federal economy the sign of the welfare effects of the introduction of regional income taxes is very sensitive to the particular institutional arrangements.

Keywords

Federal State Institutional Arrangement Welfare Effect Equilibrium Analysis Computable General Equilibrium 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 1998

Authors and Affiliations

  • Georg Hirte
    • 1
  1. 1.Department of Business Administration, Catholic University of Eichstätt, Auf der Schanz 49, D-85051 Ingolstadt, Germany (Fax: +49 841-937-2842)DE

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