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Fiscal risk sharing and redistribution between Austrian states

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  • Lukas Reiss

    (Oesterreichische Nationalbank)

Abstract

The recession of 2012/13 in the euro area has led to various suggestions on how to increase fiscal risk sharing between member states, preferably without much permanent redistribution. In this context, we analyse the extent of fiscal risk sharing and redistribution between Austrian states from 2000 to 2019. Overall, fiscal policy smooths about one tenth of regional GDP shocks. This is similar to the magnitude observed in other federal countries. The main contributors to fiscal risk sharing are the federal budget and social security funds. However, the revenue sharing scheme between the federal government and subnational governments plays an important role, too. This system also shows how risk sharing can be achieved without much redistribution. This desirable feature is due to mechanisms which explicitly benefit high-income states. At the same time, other parts of the Austrian fiscal system induce less fiscal risk sharing, but have a much larger redistributive impact between states. Furthermore, while the overall Austrian fiscal system is highly redistributive between states, net contributions vary substantially over time.

Suggested Citation

  • Lukas Reiss, 2022. "Fiscal risk sharing and redistribution between Austrian states," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(1), pages 1-20, February.
    • Handle: RePEc:kap:empiri:v:49:y:2022:i:1:d:10.1007_s10663-021-09525-6
    DOI: 10.1007/s10663-021-09525-6
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    References listed on IDEAS

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    1. Burriel, Pablo & Chronis, Panagiotis & Freier, Maximilian & Hauptmeier, Sebastian & Reiss, Lukas & Stegarescu, Dan & Van Parys, Stefan, 2020. "A fiscal capacity for the euro area: lessons from existing fiscal-federal systems," Occasional Paper Series 239, European Central Bank.
    2. Lars P. Feld & Christoph A. Schaltegger & Janine Studerus, 2018. "Regional Risk Sharing and Redistribution - The Role of Fiscal Mechanisms in Switzerland," CESifo Working Paper Series 6902, CESifo.
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    5. Cimadomo, Jacopo & Ciminelli, Gabriele & Furtuna, Oana & Giuliodori, Massimo, 2020. "Private and public risk sharing in the euro area," European Economic Review, Elsevier, vol. 121(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk sharing; Fiscal federalism; Regional accounts;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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