Abstract
Abstract The article analyses whether the efficiency of economic policy decisions in national and supranational communities can be improved by deepening the division of labor between different levels of government. Using a model based on the theory of fiscal federalism, normative criteria for the optimal vertical distribution of authority are developed. A comparison between the derived optimality conditions and the factual distribution of authority in the Federal Republic of Germany and the European Union indicates that in Germany as well as within the EU a decentralisation of economic policy authority would be welfare-improving.
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