Autore:
Revelli, Federico Titolo:
Tax mix corners and other kinksPeriodico:
Università degli studi di Torino. Dip. Di Economia e Statistica Cognetti de Martiis. Working paper seriesAnno:
2010 - Volume:
12 - Fascicolo:
17 - Pagina iniziale:
1 - Pagina finale:
39This paper models the local tax mix determination process in the presence of state-wide tax limitations and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat
misleadingly called flypaper effect) arises in the endogenously generated constrained tax mix and cannot in general be taken as a symptom of local government overspending. By means of a panel data switching regression approach that allows for fixed effects and endogenous selection, the paper exploits
the clustering of Italian Provinces at the corners produced by upper and lower tax limitations, and provides evidence of considerable cap-generated excess sensitivity.
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