Fiscal Incentive Effects of the German Equalization System

Does reliance on transfers weaken fiscal discipline and encourage pro-cyclical fiscal policies in recipient subnational governments? Using fiscal reaction functions for a panel of the German Länder, this paper finds a positive answer to both questions. Net-recipient states (Länder, benefiting from the transfer system) have not reduced primary expenditure significantly in response to rising deficits, but have instead relied on vertical transfers from the federal government to ensure debt sustainability. Moreover, they have pursued pro-cyclical policies, particularly by raising expenditures in g

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Year of publication:	2009
Authors:	Stehn, Sven Jari
Other Persons:	Fedelino, Annalisa (contributor)
Publisher:	Washington : International Monetary Fund
Subject:	Nachhaltigkeit \| Sustainability \| Deutschland \| Germany \| Finanzpolitik \| Fiscal policy \| Finanzbeziehungen \| Fiscal relations

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Extent:	Online-Ressource (31 p)
Series:	IMF Working Papers IMF working paper ; WP/09/124
Type of publication:	Book / Working Paper
Language:	English
Notes:	Description based upon print version of record Contents; I. Introduction; II. Fiscal Discipline and Fiscal Transfers: A Difficult Nexus; Figures; 1. Subnational Shares in Total Spending and Revenue, 2006; 2. Comparative Composition of Subnational Revenue; A. Germany's Transfer System; 3. Net Contributing and Net Receiving Länder; 4. Evolution of the Transfer System; B. Potential Implications of Transfers; 5. Debt by Government Level; 6: Länder Debt; III. Framework, Methodology, and Data; A. The Inter-Temporal Budget Constraint; B. Cyclicality; C. Data; IV. Empirical Analysis; Tables; 1. Germany: Descriptive Statistics, 1985-2007 A. Univariate Analysis: Fiscal Reaction Functions2. Fiscal Behavior of the Old Länder, 1985-2007; 3. Behavior of Primary Expenditure for Länder, 1985-2007; 4. Robustness Check I: Behavior of Primary Expenditure for Länder, 1985-2007; B. Multivariate Analysis: VARs; 5. Robustness Check II: Behavior of Primary Expenditure; 7. Länder Behavior and Average Received Transfers, 1985-2007; 8. Output Gap Shock; V. Policy Implications and Conclusions; 9. Primary Spending Shock; Appendix I; Appendix Table 6: Unit root tests; References
ISBN:	978-1-4518-7271-2 ; 978-1-4519-1700-0 ; 978-1-4518-7271-2
Source:	ECONIS - Online Catalogue of the ZBW

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