Dr. Santiago Pinto (p)

We examine the determinants of the corporate income tax system when firms operate in multiple regions and local governments use a formula apportionment (FA) system to allocate the firms' corporate income across regions. When a firm, such as a multi-regional firm (MRF), has business activities in multiple regions, measuring income earned in each region raises a complex conceptual and administrative problem. In the FA regime, the MRF's taxable income is determined using a formula that considers the company's capital, sales, and labor shares at each location. The present paper develops a theoretical framework that generalizes the analysis of Pinto (2007). In our setup, a MRF has a presence in two regions, and regional governments strategically decide the weights in the formula. The MRF produces a homogeneous good in one or two regions, and the good can be sold domestically or shipped to the subsidiary in the other region. Domestic prices are endogenously determined. We derive the decentralized FA system when regional governments consider the formula's impact on the welfare of domestic consumers, tax revenue, and the MRF, and compare these outcomes with those of centralized solutions.

Dr. Benedikt Herrmann (p)

This paper examines how place-based policies influence economic outcomes under varying local fiscal incentives. We measure fiscal incentives by the share of locally raised taxes tied to local economic performance, which captures the extent to which local governments benefit directly from expanding their tax base. In the context of the EU Cohesion Policy, we show that regions with stronger incentives at municipal level experience significantly higher investment and employment growth when receiving transfers, while regions with weakly incentivised municipalities see limited or no effects. Mechanism analysis reveals that municipalities with strong incentive structures direct funds toward growth-enhancing sectors and technological innovation, whereas less-incentivised recipients channel transfers more toward consumptive expenditures and status-quo investments. These results underscore the importance of local fiscal incentives in shaping the efficiency and long-term impact of place-based policies, and suggest that strengthening fiscal incentives could enhance the effectiveness of future EU funding instruments.

Dr. Agnieszka Orankiewicz (p), Prof. Maciej Turała

Local governments play a pivotal role in shaping economic development by providing public services, infrastructure, and an institutional environment conducive to growth. In transition economies, however, this role is increasingly conditioned by fiscal arrangements that may weaken local autonomy. This paper examines the relationship between local revenue structures, financial autonomy, and development capacity in Poland, a post-transition country that initially pursued strong decentralisation reforms but has experienced growing tendencies toward fiscal re-centralisation.

The main objective of the study is to assess the evolution of local government autonomy in Poland between 1991 and 2020, with particular emphasis on financial autonomy as a prerequisite for effective local development management. The analysis addresses three interrelated questions: whether fiscal decentralisation has increased local governments' role in public spending, whether this has translated into greater financial autonomy, and how changes in revenue structures affect local governments' capacity to stimulate and manage economic development.

Using comprehensive data covering almost the entire population of Polish communes, drawn from Statistics Poland and the Ministry of Finance, the study applies four types of measures of financial autonomy. To capture effective revenue sovereignty, the analysis distinguishes between formally defined own revenues and genuinely controllable own-source revenues by excluding centrally regulated shares in personal and corporate income taxes.

The results reveal a clear divergence between expenditure decentralisation and revenue autonomy. While local governments account for a growing share of public expenditure, their financial autonomy has systematically declined across all commune size categories. Increasing reliance on centrally controlled taxes and targeted intergovernmental grants weakens the fiscal link between local economic performance and municipal budgets, thereby reducing incentives for proactive, development-oriented policies. Borrowing constraints further limit local governments' ability to finance long-term investments.

The paper concludes that Poland illustrates a broader challenge in transition economies: decentralisation of responsibilities without adequate decentralisation of revenue authority undermines local governments' role as autonomous development actors. Strengthening genuine own-source revenues while preserving effective equalisation mechanisms is essential to enhancing place-based development capacity.

Dr. Sander Ramboer (p)

Local governments play a key role in the siting of renewable energy infrastructure, yet often face weak incentives to host projects that generate primarily national benefits while imposing local externalities. This paper examines whether strengthening municipal fiscal incentives can influence the development of wind farms. A 2018 reform in Finland raised the maximum property tax rate applicable to wind turbines, substantially increasing the potential revenue municipalities receive per turbine. We leverage cross-municipal heterogeneity in the resulting fiscal incentive, combining a stacked machine-learning estimator for siting probabilities with matched difference-in-differences and event-study methods. The reform led municipalities with larger fiscal gains to become markedly more likely to permit wind farm construction. We also show that new turbine tax revenue induces adjustments in municipal tax policy, with municipalities shifting tax burdens from residents toward turbines. Together, the results demonstrate that local fiscal incentives can meaningfully stimulate the expansion of renewable energy.