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

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

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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Article provided by Springer in its journal Public Choice.

Volume (Year): 109 (2001)
Issue (Month): 1-2 (October)
Pages: 183-201

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Handle: RePEc:kap:pubcho:v:109:y:2001:i:1-2:p:183-201
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Philip J. Grossman, 1989. "Fiscal Decentralization and Government Size: An Extension," Monash Economics Working Papers archive-05, Monash University, Department of Economics.
  2. Grossman, Philip J, 1992. "Fiscal Decentralization and Public Sector Size in Australia," The Economic Record, The Economic Society of Australia, vol. 68(202), pages 240-46, September.
  3. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  4. Olson, Mancur, Jr, 1969. "The Principle of "Fiscal Equivalence": The Division of Responsibilities among Different Levels of Government," American Economic Review, American Economic Association, vol. 59(2), pages 479-87, May.
  5. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Homburg, Stefan, 1996. "Notwendigkeit einer Finanzreform," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 336-338.
  7. Homburg, Stefan, 1994. "Anreizwirkungen des deutschen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 312-330..
  8. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
  9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  10. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
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