IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Fiscal Federalism in Germany: Stabilization and Redistribution Before and After Unification

  • Ralf Hepp
  • Jürgen von Hagen

We provide estimates of the risk-sharing and redistributive properties of the German federal fiscal system based on data from 1970 to 2006, with special attention to the effects of German unification. Tax revenue sharing between the states and the federal government and the fiscal equalization mechanism (Länderfinanzausgleich) together reduce differences in per-capita state incomes by almost 40 percent. The federal fiscal system offsets 47 percent of an asymmetric shock to state per-capita incomes. This effect has significantly decreased after the inclusion of the East German states in 1995. Furthermore, we find that the German fiscal system provides almost perfect insurance for state government budgets against asymmetric revenue shocks; also, its redistributive effect with regard to the tax resources available to state governments is very strong. Copyright 2012, Oxford University Press.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1093/publius/pjr004
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Oxford University Press in its journal Publius: The Journal of Federalism.

Volume (Year): 42 (2012)
Issue (Month): 2 (April)
Pages: 234-259

as
in new window

Handle: RePEc:oup:publus:v:42:y:2012:i:2:p:234-259
Contact details of provider: Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://publius.oxfordjournals.org/
Email:

Order Information: Web: http://www.oup.co.uk/journals

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jüßen, Falko, 2006. "Interregional Risk Sharing and Fiscal Redistribution in Reunified Germany," Technical Reports 2006,40, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  2. Michael Smart, 2004. "Equalization and Stabilization," Canadian Public Policy, University of Toronto Press, vol. 30(2), pages 195-208, June.
  3. Pierfederico Asdrubali & Soyoung Kim, 2000. "Dynamic Risk Sharing in the United States and Europe," Econometric Society World Congress 2000 Contributed Papers 1621, Econometric Society.
  4. Homburg, Stefan, 1994. "Anreizwirkungen des deutschen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 312-330..
  5. Robin Boadway & Anwar Shah, 2007. "Intergovernmental Fiscal Transfers : Principles and Practice," World Bank Publications, The World Bank, number 7171.
  6. 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.
  7. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
  8. Melitz, Jacques & Zumer, Frédéric, 1998. "Regional Redistribution and Stabilization by the Centre in Canada, France, the United Kingdom and the United States: New Estimates Based on Panel Data Econometrics," CEPR Discussion Papers 1829, C.E.P.R. Discussion Papers.
  9. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
  10. Lockwood, Ben, 1999. "Inter-regional insurance," Journal of Public Economics, Elsevier, vol. 72(1), pages 1-37, April.
  11. Sascha O. Becker & Mathias Hoffmann, 2003. "Intra-and International Risk-Sharing in the Short Run and the Long Run," CESifo Working Paper Series 1111, CESifo Group Munich.
  12. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
  13. Bucovetsky, Sam, 1998. "Federalism, equalization and risk aversion," Journal of Public Economics, Elsevier, vol. 67(3), pages 301-328, March.
  14. Kletzer, Kenneth & von Hagen, Jürgen, 2000. "Monetary Union and Fiscal Federalism," CEPR Discussion Papers 2615, C.E.P.R. Discussion Papers.
  15. Stefano G. Athanasoulis & Eric van Wincoop, 2001. "Risk Sharing Within The United States: What Do Financial Markets And Fiscal Federalism Accomplish?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 688-698, November.
  16. Buettner, Thiess, 2002. "Fiscal federalism and interstate risk sharing: empirical evidence from Germany," Economics Letters, Elsevier, vol. 74(2), pages 195-202, January.
  17. David Wildasin, 1996. "Introduction: Fiscal Aspects of Evolving Federations," International Tax and Public Finance, Springer, vol. 3(2), pages 121-135, May.
  18. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1081-1110, November.
  19. Melitz, Jacques & Zumer, Frederic, 2002. "Regional redistribution and stabilization by the center in Canada, France, the UK and the US:: A reassessment and new tests," Journal of Public Economics, Elsevier, vol. 86(2), pages 263-286, November.
  20. Razin, A. & Sadka, E., 1997. "Globalization : Public Economics Policy Perspectives," Papers 20-97, Tel Aviv.
  21. van Wincoop, Eric, 1995. "Regional risksharing," European Economic Review, Elsevier, vol. 39(8), pages 1545-1567, October.
  22. 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.
  23. Sorensen, B.E. & Yosha, O., 1997. "Federal Insurance of the U.S. States: An Empirical Investigation," Papers 16-97, Tel Aviv.
  24. 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.
  25. Büttner, Thiess, 1999. "Regional Stabilization by Fiscal Equalization? Theoretical Considerations and Empirical Evidence from Germany," ZEW Discussion Papers 99-23, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  26. Robin Boadway, 2003. "The Theory and Practice of Equalization," Working Papers 1016, Queen's University, Department of Economics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oup:publus:v:42:y:2012:i:2:p:234-259. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.