IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v45y2017i6p723-747.html
   My bibliography  Save this article

The Incentive Effects of Equalization Grants on Tax Policy

Author

Listed:
  • Ergete Ferede

Abstract

This article provides an empirical analysis of the incentive effects of equalization grants on business and personal income tax rates using panel data from Canadian provinces. We exploit the discontinuity in the equalization grant allocation formula to identify the exogenous income and incentive effects of equalization grants on tax policy. Our empirical results indicate that equalization grants provide provincial governments an incentive to raise their business and personal income tax rates. The results also suggest that if the equalization program in its current form was abandoned, then business and personal income tax rates would be lower in the grant receiving provinces.

Suggested Citation

  • Ergete Ferede, 2017. "The Incentive Effects of Equalization Grants on Tax Policy," Public Finance Review, , vol. 45(6), pages 723-747, November.
    • Handle: RePEc:sae:pubfin:v:45:y:2017:i:6:p:723-747
    as

    Download full text from publisher

    File URL: http://pfr.sagepub.com/content/45/6/723.abstract
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2022. "On the effects of intergovernmental grants: a survey," Working Papers. Collection A: Public economics, governance and decentralization 2204, Universidade de Vigo, GEN - Governance and Economics research Network.
    2. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
    3. Till Gross, 2021. "Dynamic Optimal Fiscal Policy in a Transfer Union," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 194-238, October.
    4. Thiess Buettner & Manuela Krause, 2021. "Fiscal equalization as a driver of tax increases: empirical evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 90-112, February.
    5. Willem Sas, 2017. "Can fiscal equalisation mitigate tax competition? Ad valorem and residence-based taxation in a federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 817-853, September.
    6. Monika Banaszewska, 2023. "Equalisation Grants and Local Taxation: The Case of Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 47-65.
    7. Thiess Büttner, 2021. "Land Use and Fiscal Competition," CESifo Working Paper Series 8958, CESifo.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:45:y:2017:i:6:p:723-747. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.