Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271998 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10354
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The transfer elasticity of income tax rates is an important parameter in public finance. Given the significant fiscal autonomy of Swiss municipalities, Switzerland is an ideal setting for examining behavioral responses to tax policy. Using a regression kink design, we find robust causal evidence that transfers have a positive local average treatment effect on municipal expenditures while leaving the income tax rate (and other tax rates) unchanged. Thus, 'money sticks where it hits', providing comprehensive support for the flypaper effect, including with regard to income tax responses.
Subjects: 
public finance
regression kink design
flypaper effect
transfers
JEL: 
C21
H72
H77
Document Type: 
Working Paper
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