EU taxes play a key role in political and economic discussions about the future of the EU own resource system, and their desirability can vary accordingly. It is therefore essential to clearly articulate the goals which are to be achieved by the introduction of this new financing tool. This paper provides a critical review of pros and cons of EU taxes put forward in the literature. Reviewing the conventional fiscal federalism and political economy literature on this topic it can be concluded that there is no convincing (overall) case for funding the EU budget with EU taxes rather than with contributions by Member States which currently make up for the lion’s share of EU own resources. There are, however, some specific issues arising from a sustainability perspective, which could be addressed with the introduction of EU taxes. Departing from a comprehensive concept of sustainability which is based on the economic, the social, the environmental and the cultural/institutional pillar of sustainability, the paper identifies existing sustainability gaps in taxation in the EU. EU taxes if designed accordingly may be suitable instruments to reduce these sustainability gaps and thus to strengthen sustainability-orientation of taxation in the EU.

July 6, 2017

The Political Economy of EU-funds: Evidence from Poland

Monika Banaszewska, Ivo Bischoff

Page range: 191-224

Abstract

We provide an empirical study analysing the distribution of EU funds among 2478 Polish municipalities in the period 2007–2011. EU funds are found to be concentrated in smaller municipalities and economically weak sub-regions, and do not increase in the municipalities’ fiscal capacity. Our primary focus rests on the question whether regional governments follow their own political self-interest when allocating EU funds even though national parties only play a minor role in Polish local politics and thus the conventional logic of supporting aligned governments does not apply. Difference-in-difference estimations show that the answer is affirmative: Municipalities whose voters are aligned with the regional government receive more EU funds per capita than non-aligned municipalities. Furthermore, we find support for the swing-district hypothesis: EU funds per capita decrease in the vote-share differential between the two leading parties.

September 10, 2017

Fiscal Decentralisation and Income Inequality: Empirical Evidence from OECD Countries

Sibylle Stossberg, Hansjörg Blöchliger

Page range: 225-273

Abstract

Fiscal decentralisation might be partially responsible for rising income inequality by exacerbating competition between sub-national governments and compromising national government’s ability to redistribute. This paper investigates the relationship between fiscal decentralisation and economy-wide disposable income inequality. Drawing on a dataset of up to 20 OECD countries and covering the period 1996 to 2011, the analysis links a set of income inequality indicators and a wide array of fiscal decentralisation indicators. Results indicate that decentralisation might actually reduce income inequality, as measured by the Gini coefficient, but the effect is rather small and unstable across specifications. Fine-graining the analysis by using income percentile ratios, in turn, produces more significant and stable results. As such, the effects of fiscal decentralisation are not the same along the income distribution. While decentralisation tends to be associated with a reduction in income inequality between high incomes and the median, it is linked to a divergence of low income groups from the median, notably via sub-central tax autonomy. Transfers between levels of government also tend to be associated with an increase in the gap between lower and middle incomes. Interpreting these effects jointly, it seems that mainly middle income earners benefit from fiscal decentralisation.

August 26, 2017

Horizontal Transfers and Consumption Smoothing in a Monetary Union

Werner Roeger, Lukas Vogel

Page range: 275-294

Abstract

The paper investigates the impact of automatic horizontal fiscal transfers on risk sharing and consumption smoothing in a 2-country DSGE model of monetary union. In particular, it uses the Asdrubali et al. (1996) approach to quantify and decompose the strength of consumption smoothing. The system of horizontal transfers between member countries has no borrowing capacity and, hence, needs to be balanced in every period in time. The transfers increase the fiscal space of national governments in (relatively) adverse situations, i. e. when the budget balance deteriorates (falling tax revenue, higher expenditure) and debt issuance is costly or constrained. The simulation results illustrate the smoothing capacity of horizontal transfers, but also suggest a significant degree of crowding-out of alternative risk sharing channels. Consequently, net stabilisation gains in the “normal times” scenario are small. Net gains increase when financial constraints in the recipient country tighten at the national level.

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The Journal of Economics and Statistics (Jahrbücher für Nationalökonomie und Statistik) is a scientific journal published in Germany since 1863. The journal publishes papers in all fields of economics and applied statistics. A specific focus is on papers combining theory with empirical analyses. Papers providing conclusions for economic policy in Europe are particularly welcome. Nevertheless, distinguished papers dealing exlusively with economic theory, empirical models, or economic history, will not be excluded from consideration.

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Call for Papers

Special Issue on "Sports Economics"

Guest Editors: Bernd Frick, Paderborn University; Thomas Peeters, Erasmus University Rotterdam; Rob Simmons, Lancaster University

Timeline: Submission of full papers November 30, 2023

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Special Issue on "Advancing Agent-Based Economics"

Guest Editors: Michael Neugart, Technical University of Darmstadt) and Frank Westerhoff, University of Bamberg

Timeline: Submission of full papers December 31, 2023

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Special Issue on "Central Bank Digital Currency"

Guest Editors: Katrin Assenmacher, European Central Bank and Michael Frenkel, WHU

Timeline: Submission of full papers January 08, 2024

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