The Fiscal Response to Revenue Shocks

Arbeitspapier

We study the impact of fiscal revenue shocks on local fiscal policy. We focus on the very volatile revenues from the immovable property gains tax in the canton of Zurich, Switzerland, and analyze fiscal behavior following large and rare positive and negative revenue shocks. We apply causal machine learning strategies and implement the post-double-selection LASSO estimator to identify the causal effect of revenue shocks on public finances. We show that local policymakers overall predominantly smooth fiscal shocks. However, we also find some patterns consistent with fiscal conservatism, where positive shocks are smoothed, while negative ones are mitigated by spending cuts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8854

Classification and Topics

• Classification: Wirtschaft ; Analysis of Collective Decision-Making: General ; Structure, Scope, and Performance of Government ; State and Local Taxation, Subsidies, and Revenue ; State and Local Budget and Expenditures
• Subject: local public finance ; fiscal policy ; fiscal shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berset, Simon ; Huber, Martin ; Schelker, Mark
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/232451
• Last update: 10.03.2025, 11:43 AM CET