84 2019 Empirical essays on fiscal federalism and political economy in Germany Manuela Maria Krause Bibliografische Information der Deutschen Nationalbibliothek Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. ISBN: 978-3-95942-061-7 Alle Rechte, insbesondere das der Übersetzung in fremde Sprachen, vorbehalten. Ohne ausdrückliche Genehmigung des Verlags ist es auch nicht gestattet, dieses Buch oder Teile daraus auf photomechanischem Wege (Photokopie, Mikrokopie) oder auf andere Art zu vervielfältigen. © ifo Institut, München 2019 Druck: ifo Institut, München ifo Institut im Internet: http://www.cesifo-group.de 84 2019 Empirical essays on fiscal federalism and political economy in Germany Manuela Maria Krause Herausgeber der Reihe: Clemens Fuest Schriftleitung: Chang Woon Nam Acknowledgments First and foremost, I would like to thank my first supervisor, Niklas Potrafke, for his guidance and support throughout all stages of this thesis. His encouragement and helpful comments were always a source of inspiration for me. I also want to thank Thiess Büttner as my second supervisor for his support and valuable comments on my research ideas. I learned much from both – especially in the joint research projects – which also broadened my horizons. I am also grateful to Andreas Haufler for agreeing to be my third supervisor. I further want to thank my colleagues Johannes Blum, Luisa Dörr, Florian Dorn, Stefanie Gäbler, Björn Kauder, and Martin Mosler for their support, the fruitful and interesting discus- sions as well as the pleasant lunch and coffee breaks. I enjoyed our joint trips and our confer- ence stays at various cities in the world. I am especially thankful to Luisa and Stefanie for our talks, the daily coffee breaks in the morning, the muffins, their extensive moral support and their friendship. I also would like to thank all my former colleagues, with whom I shared my first experiences in academia – Kai Jäger, Markus Reischmann, Marina Riem, and Christoph Schinke. Interns, research assistants and the administrative staff at the ifo Institute provided me with helpful support during the entire time. Among many others, I am especially grateful to Kristin Fischer and Alexander H. Schwemmer for their excellent research assistance and helpful sug- gestions for my own work and for the third-party projects. Completing this thesis would not have been possible without the help of my family and friends. I especially want to thank my parents for their endless support, encouragement, love and the regular parcels with chocolate and other sweets – especially in the last weeks while finishing this thesis. Last but not least, I thank Björn for his love, his comprehensive support, his incredible patience and for being there for me whenever I need it. i Empirical essays on fiscal federalism and political economy in Germany Inaugural-Dissertation zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.) an der Ludwig-Maximilians-Universität München 2018 vorgelegt von: Manuela Maria Krause Referent: Prof. Dr. Niklas Potrafke Korreferent: Prof. Dr. Thiess Büttner Promotionsabschlussberatung: 30. Januar 2019 Datum der mündlichen Prüfung: 23.01.2019 Namen der Berichterstatter: Prof. Dr. Niklas Potrafke Prof. Dr. Thiess Büttner Prof. Dr. Andreas Haufler Content 1 Introduction ..................................................................................................... 1 References .............................................................................................................................. 9 2 Communal fees and election cycles: Evidence from German municipalities ........... 11 Introduction ................................................................................................................ 12 Related literature ........................................................................................................ 13 Institutional backdrop ................................................................................................ 15 2.3.1 German municipalities ................................................................................... 15 2.3.2 Municipal elections ......................................................................................... 16 Data and methodology ............................................................................................... 17 2.4.1 Data sources ................................................................................................... 17 2.4.2 Empirical strategy ........................................................................................... 18 Regression results ....................................................................................................... 19 2.5.1 Baseline results ............................................................................................... 19 2.5.2 Robustness tests ............................................................................................. 21 Conclusion ................................................................................................................... 24 References ............................................................................................................................ 26 Appendix ............................................................................................................................... 31 3 Electoral cycles in MPs‘ salaries: Evidence from the German states ...................... 39 Introduction ................................................................................................................ 40 Institutional backdrop ................................................................................................ 42 3.2.1 MP salaries in the German states ................................................................... 42 3.2.2 State elections ................................................................................................ 42 Empirical analysis ....................................................................................................... 43 3.3.1 Descriptive statistics ....................................................................................... 43 3.3.2 Empirical strategy ........................................................................................... 44 3.3.3 Regression results ........................................................................................... 45 3.3.4 Robustness tests ............................................................................................. 46 Conclusion ................................................................................................................... 48 References ............................................................................................................................ 50 v Appendix ............................................................................................................................... 56 4 Do left-wing governments decrease income inequality? Empirical evidence based on salaries of civil servants .............................................................................. 67 Introduction ................................................................................................................ 68 Background and hypothesis ....................................................................................... 68 4.2.1 Government ideology and income redistribution ......................................... 68 4.2.2 Ideology-induced policies in the German states ........................................... 70 Institutional backdrop ................................................................................................ 71 4.3.1 Salaries of civil servants ................................................................................. 71 4.3.2 The German political party landscape........................................................... 71 Empirical analysis ....................................................................................................... 72 4.4.1 Empirical strategy ........................................................................................... 72 4.4.2 Descriptive statistics ....................................................................................... 74 4.4.3 Regression results ........................................................................................... 74 4.4.4 Robustness tests ............................................................................................. 75 Salaries of cabinet members ...................................................................................... 76 Conclusion ................................................................................................................... 77 References ............................................................................................................................ 78 Appendix ............................................................................................................................... 81 5 The real-estate transfer tax and government ideology: Evidence from the German states ................................................................................................ 89 Introduction ................................................................................................................ 90 Institutional background ...........................................................................................