We find that policy decisions made by elected politicians in Portuguese municipalities violate the predictions of standard microeconomic theory. Municipalities can choose a withholding rate between zero and five percent of the income tax revenue collected within their boundaries by the national...

We find that policy decisions made by elected politicians in Portuguese municipalities violate the predictions of standard microeconomic theory. Municipalities can choose a withholding rate between zero and five percent of the income tax revenue collected within their boundaries by the national...

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany’s fiscal equalization scheme triggered by Census revisions of official population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt...