In this paper we examine financial interactions between tiers of government. Whilst most existing empirical evidence has focused on the US, it is difficult to generalize conclusions obtained to countries where the position and remit of lower tiers of government is evolving or is less clear...

Empirical evidence from the U.S. and the European Union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution. This paper presents an argument in favor of such differentiated budgetary...

Legislative bargaining theory suggests that fiscal transfers among member states of a federation are determined to a substantial degree by political bargaining powers. Malapportionment of the states' population in the legislature is claimed to lead to disproportionally higher benefits to...

We examine whether US and German state governments pursue sustainable fiscal policies taking into account fiscal transfers. Using panel data techniques we investigate whether the debt-to-GDP ratio had a positive influence on the primary surplus (Bohn-model). We show that including/excluding...

In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare...

I formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region's preferred fiscal policy and benefiting from inter-regional risk sharing depends on the...

This paper provides an empirical test of a principal tenet of fiscal federalism: that spending discretion, when granted to localities, leads to public-sector heterogeneity, with public-good levels adjusting to suit local demands. The test is based on a simple model of partial fiscal...

Fiscal sustainability tests have largely ignored the institutional setting of fiscal policy making. Fiscal equalization schemes in federal states are one such institution. We examine whether German state governments pursue sustainable fiscal policies taking into account fiscal equalization...

This paper studies comprehensive national panel data of local option sales taxes at the monthly frequency. I calculate state-by-month population weighted averages of local sales tax rates. I document ten stylized facts concerning the time series patterns and spatial dynamics of local sales...

Most cities enjoy some autonomy over how they tax their residents, and that autonomy is typically exercised by multiple municipal governments within a given city. In this chapter, we document patterns of city-level taxation across countries, and we review the literature on a number of salient...