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Bargaining Power of Smaller States in Germany's Landerfinanzausgleich 1979-90

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  • Pitlik, Hans
  • Schmid, Gunther
  • Strotmann, Harald

Abstract

In this paper we explore the impact of political factors on redistribution across the states in the German Landerfinanzausgleich. From a public choice perspective the smaller states are supposed to have a higher influence on decisions in the second legislative chamber due to a lower shadow price of their votes, which implies a higher bargaining power. As the federal government's policy depends on a majority in the second chamber there is an incentive to buy smaller states' votes. Controlling for GDP per capita, we find statistically significant support for our hypotheses. Copyright 2001 by Kluwer Academic Publishers

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  • Pitlik, Hans & Schmid, Gunther & Strotmann, Harald, 2001. "Bargaining Power of Smaller States in Germany's Landerfinanzausgleich 1979-90," Public Choice, Springer, vol. 109(1-2), pages 183-201, October.
    • Handle: RePEc:kap:pubcho:v:109:y:2001:i:1-2:p:183-201
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    1. Hans Pitlik & Friedrich Schneider & Harald Strotmann, 2006. "Legislative Malapportionment and the Politicization of Germany's Intergovernmental Transfer System," Public Finance Review, , vol. 34(6), pages 637-662, November.
    2. Ralf Hepp & Jürgen von Hagen, 2012. "Fiscal Federalism in Germany: Stabilization and Redistribution Before and After Unification," Publius: The Journal of Federalism, CSF Associates Inc., vol. 42(2), pages 234-259, April.
    3. Frank, Marco & Stadelmann, David, 2021. "More federal legislators lead to more resources for their constituencies: Evidence from exogenous differences in seat allocations," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 230-243.
    4. Corinna Ahlfeld, 2010. "Reputation Sells -Compensation Payments in the Political Sphere," Departmental Discussion Papers 145, University of Goettingen, Department of Economics.
    5. Ralf Hepp & Jürgen von Hagen, 2013. "Interstate risk sharing in Germany: 1970--2006," Oxford Economic Papers, Oxford University Press, vol. 65(1), pages 1-24, January.
    6. Alexander Fink & Thomas Stratmann, 2011. "Institutionalized Bailouts and Fiscal Policy: Consequences of Soft Budget Constraints," Kyklos, Wiley Blackwell, vol. 64(3), pages 366-395, August.
    7. Padovano, Fabio, 2012. "The drivers of interregional policy choices: Evidence from Italy," European Journal of Political Economy, Elsevier, vol. 28(3), pages 324-340.
    8. Friedrich Schneider & Hans Pitlik & Harald Strotmann & Günther Schmid, 2001. "On the politicization of intergovernmental fiscal relations in Germany after unification," Economics working papers 2001-05, Department of Economics, Johannes Kepler University Linz, Austria.
    9. Maaser, Nicola & Stratmann, Thomas, 2016. "Distributional consequences of political representation," European Economic Review, Elsevier, vol. 82(C), pages 187-211.

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