This paper analyzes how (local) tax havens function. Using the German municipal business tax setting as a laboratory, I investigate the characteristics and emergence of local tax havens. I demonstrate that local tax havens are situated in close proximity to large agglomeration areas, while firms' profit-to-wage ratios in these jurisdictions are exceptionally high. I document that the amount of local profit shifting is substantial. The empirical results indicate that local profit shifting is of a similar magnitude to recent findings regarding international profit shifting by German multinationals. I deploy synthetic difference-in-differences methods, combined with administrative data sources and standard profit-shifting equations, to estimate the amount of profit shifting to local tax havens. Between 2013 and 2019, around 52 billion Euros of corporate profits were shifted to local tax havens. The results are driven by a small number of large firms that offer business and financial services. The direct fiscal cost to non-tax haven municipalities amounts to roughly 7.9 billion Euros, while tax haven municipalities gain around 4.3 billion Euros in tax revenues. I conduct a case study on the emergence of Germany's largest local tax havens. I estimate that between 2012 and 2019, around 20.5 billion was transferred to its jurisdiction. The increase in local tax revenues is used to reduce public debt burdens and finance a high level of public expenditures.

This paper analyzes the local economic impacts of troop deployments. We exploit variation from the historic large-scale US troop withdrawal from Germany triggered by the end of the Cold War, to estimate the effect on local labor markets and public finances. We use administrative data provided by the US Department of Defense to quantify the size of the troop withdrawal at the municipal level. Using a synthetic difference-in-differences estimator, we find negative effects on local labor markets: for each withdrawn US soldier, the number of local jobs decreases by 0.53. The decrease in economic activity results in a reduction of revenues which municipalities balance by lowering their expenditures, while increasing business and property tax multipliers. In individual-level analyses, we document that Workers displaced by the closure of a US military base have persistently lower employment rates. Moreover, their daily wages remain around 9.2 percent lower fifteen years after the layoff. The negative impact on labor outcomes is particularly pronounced for women, older workers, and those employed in regions with more unfavorable initial labor market conditions.

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