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Tax Mandates and Factor Input Use: Theory and Evidence from Italy

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  • Federico Revelli

Abstract

This paper investigates theoretically and empirically the consequences of state fiscal mandates for financially distressed regions concerning the use of factor inputs (labor, capital, and energy) in local production processes. I exploit the switch from systematic state bailout of regional deficits to selectively mandated hikes in regions´ own business tax rates that took place in Italy around the mid 2000s, to identify the effects of tax policy on the regional economy. The estimation results reveal that mandated business tax increases stimulate energy use and hamper the employment of human resources in science and technology occupations.

Suggested Citation

  • Federico Revelli, 2015. "Tax Mandates and Factor Input Use: Theory and Evidence from Italy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(3), pages 328-359, September.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201509)71:3_328:tmafiu_2.0.tx_2-x
    DOI: 10.1628/001522108X14331675558807
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    More about this item

    Keywords

    business income tax; energy tax; energy use; state mandates;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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