Abstract
Abstract In spite of its long history, reform of financial equalization at local government level has not brought the necessary improvements in efficiency. Therefore, it is surprising that the criticized West German system was transferred almost unchanged to the East German Laender in the course of reunification. Obviously the politicians were in conflict between testing new promising alternatives and preserving the calculable institutional structure. Therefore, this paper compares the financial equalization law of two Laender (Baden-Wuerttemberg and Saxony) in order to research its suitability under different socio-economic conditions. In the analysis we can clearly show the impact of socio-economic characteristics on the carrying ability of institutions, so any transferability of local financial equalization systems has to be rejected.
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