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The growth and variability of local taxes: An application to the Italian regions

Author

Listed:
  • Raffaele Lagravinese
  • Paolo Liberati
  • Agnese Sacchi

Abstract

This paper investigates the short- and long-run responses of tax bases used by sub-central governments with regard to regional GDP. The methodology is applied to the two main taxes levied by the Italian regions over the period 2001-2012, the surtax on the personal income tax (RPIT) and the regional tax on productive activities (RTPA). Our results suggest that both tax bases do not exhibit long-run potential growth and that they are pro-cyclical. Furthermore, this pro-cyclicality is higher in the case of RTPA and during recession periods in all regions. The results cast some doubts on the adequacy of these two bases to provide an adequate financing source to provide health and other regional public services, normally highly demanded during business cycle contractions.

Suggested Citation

  • Raffaele Lagravinese & Paolo Liberati & Agnese Sacchi, 2016. "The growth and variability of local taxes: An application to the Italian regions," Working Papers. Collection B: Regional and sectoral economics 1601, Universidade de Vigo, GEN - Governance and Economics research Network.
    • Handle: RePEc:gov:wpregi:1601
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    File URL: http://infogen.webs.uvigo.es/WPB/WP1601.pdf
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    Cited by:

    1. Raffaele Lagravinese & Paolo Liberati & Giuliano Resce, 2017. "Exploring health outcomes by stochastic multi-objective acceptability analysis: an application to Italian regions," Working Papers. Collection B: Regional and sectoral economics 1703, Universidade de Vigo, GEN - Governance and Economics research Network.
    2. Cerqua, Augusto & Pellegrini, Guido, 2018. "Local policy effects at a time of economic crisis," MPRA Paper 85621, University Library of Munich, Germany.

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    More about this item

    Keywords

    Income elasticity; Regional tax bases; Error correction model; Italy;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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