The article concerns issues of fiscal federalism in the broadest sense. It analyzes both the political causes and the economic consequences of interregional and international grants. Examples from Germany and from the European Union are considered.

In an important decision, the German Constitutional Court (Bundesverfassungsgericht) rejected a claim of the state Berlin on federal support. Berlin had argued that it were effectively bankrupt. The article considers the ruling from an economic perspective.

The paper analyzes the possible efficiency base of intergovernmental grants between rich and poor regions in a federal state.

The article analyses the incentive effects of the German system of intergovernmental grants.

The paper analyzes the possible efficiency base of intergovernmental grants between rich and poor regions in a federal state.

The article concerns issues of fiscal federalism in the broadest sense. It analyzes both the political causes and the economic consequences of interregional and international grants. Examples from Germany and from the European Union are considered.

In an important decision, the German Constitutional Court (Bundesverfassungsgericht) rejected a claim of the state Berlin on federal support. Berlin had argued that it were effectively bankrupt. The article considers the ruling from an economic perspective.

The article analyses the incentive effects of the German system of intergovernmental grants.

The paper is an expert opinion, prepared for a hearing of Germany’s Federal Commission I (Bundesstaatskommission I), which proposed constitutional changes regarding fiscal federalism and taxes.