Abstract
Abstract Over the past 50 years revenue sharing and intergovernmental grants between the central government and the states have become increasingly important in the Federal Republic of Germany. Although this system is shown to be highly inefficient no serious attempts to reform can be observed yet. This paper examines the institutional mechanisms underlying the centralization process in Germany. It is argued that the erosion of competitive elements of Germany’s fiscal constitution can be explained by a common interest of federal and state politicians to establish a fiscal cartel. Furthermore, the system of intergovernmental grants softens the states’ budget constraints, and democratic control of governments at both levels is weakened by non-transparent rules of the Laenderfinanzausgleich. Despite a latent instability of the fiscal cartel, due to distributional struggles for tax revenues between the Laender and the federal government, we conclude that a far-reaching reform of intergovernmental fiscal relations in Germany cannot be expected.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
