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Do party ties increase transfer receipts in cooperative federalism? – Evidence from Germany

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  • Bury, Yannick
  • Feld, Lars P.
  • Köhler, Ekkehard A.

Abstract

Cooperative fiscal federalism needs multi-level consent to decide on the allocation of intergovernmental transfers. We study how parliamentary representation of municipalities on the federal level influences the allocation of federal transfers to municipal governments under this type of federalism. Using a regression discontinuity design in close electoral races, we find that a directly elected member of the federal parliament, who belongs to the party that leads the federal government, induces higher infrastructure transfers from the federal government to a local jurisdiction. However, our results show that this effect only unfolds, if the parliamentarian's party is simultaneously leading the state government. Moreover, we identify party competition on the local level as a motive behind the strategic use of federal funds. Thus, our results suggest that federalism inherently entails restrictions on misusing intergovernmental transfers for political reasons.

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  • Bury, Yannick & Feld, Lars P. & Köhler, Ekkehard A., 2025. "Do party ties increase transfer receipts in cooperative federalism? – Evidence from Germany," European Journal of Political Economy, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:poleco:v:86:y:2025:i:c:s0176268024001320
    DOI: 10.1016/j.ejpoleco.2024.102630
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    2. Yannick Bury & Lars P. Feld, 2024. "Do Local Elections Affect the Spending of Intergovernmental Transfers? Evidence from Germany’s Stimulus Package of 2009," CESifo Working Paper Series 11457, CESifo.
    3. Christofzik Désirée I. & Quinckhardt Matthias, 2024. "Förderprogramme für Kommunen: politische Verflechtungen und Informationsdefizite," Wirtschaftsdienst, Sciendo, vol. 104(7), pages 482-484.

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    More about this item

    Keywords

    Fiscal federalism; Partisan alignment; Vertical transfers;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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