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On the politicization of intergovernmental fiscal relations in Germany after unification

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Author Info
Friedrich Schneider () (Department of Economics, Johannes Kepler University Linz, Austria)
Hans Pitlik () (University of Hohenheim, Department of Economics 520D, Stuttgart, Germany)
Harald Strotmann (Institut für angewandte Wirtschaftsforschung, Tübingen, Germany)
Günther Schmid (State Ministry of Economics Baden-Württemberg, Germany)

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Abstract

A recent decision of the German Constitutional Court requires political decision makers to revise the system of intergovernmental transfers in order to limit free bargaining among state and federal government officials. The present paper provides empirical support for the thesis that political discretion has become increasingly important in the transfer negotiations after Unification. We attempt to show why political influences gained weight relative to economic considerations in the determination of net gains. This politicization of the fiscal transfer system appears to be a consequence of the inability of policy makers to agree on a fundamental reform in the early 1990's.

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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2001-05.

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Date of creation: Mar 2001
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Handle: RePEc:jku:econwp:2001_05

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Find related papers by JEL classification:
D7 - Microeconomics - - Analysis of Collective Decision-Making
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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  1. Lars P. Feld & Christoph A. Schaltegger, 2004. "Voters as a hard budget constraint: On the determination of intergovernmental grants," Marburg Working Papers on Economics 200418, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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  2. Hans Pitlik, 2004. "Zur Politischen Rationalitaet der Finanzausgleichsreform in Deutschland," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 239/2004, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
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