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Subnational Bailouts in Germany

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  • Helmut Seitz

Abstract

This paper presents an investigation of subnational government bailouts in Germany. In the first part we briefly describe the system of fiscal federalism in Germany. The main part of the paper examines the bailout of two West German states. We identify the causes of the financial crisis in both states and examine the institutional settings as well as the ruling of the Constitutional Court that forced the federal government to provide bailout transfers. In addition, we investigate the impact these transfers had on the fiscal performance of both states. In a further section we provide evidence on bailouts of local governments by German states. A final section summarizes our results and presents policy conclusions.

Suggested Citation

  • Helmut Seitz, 2000. "Subnational Bailouts in Germany," Research Department Publications 3097, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:3097
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    1. Qian, Yingyi & Roland, Gerard, 1998. "Federalism and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 88(5), pages 1143-1162, December.
    2. Seitz, Helmut, 1995. "The Productivity and Supply of Urban Infrastructures," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 29(2), pages 121-141, May.
    3. Stuart Landon & Constance E. Smith, 2000. "Government debt spillovers and creditworthiness in a federation," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 634-661, August.
    4. von Hagen, Jurgen & Eichengreen, Barry, 1996. "Federalism, Fiscal Restraints, and European Monetary Union," American Economic Review, American Economic Association, vol. 86(2), pages 134-138, May.
    5. Homburg, Stefan, 1994. "Anreizwirkungen des deutschen Finanzausgleichs," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 51(3), pages 312-330.
    6. Inman, Robert P, 1995. "How to Have a Fiscal Crisis: Lessons from Philadelphia," American Economic Review, American Economic Association, vol. 85(2), pages 378-383, May.
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