The link between federalism and economic performance is still ambiguous. Aiming at clarification, we improve on a widespread shortcoming by measuring federalism not just by one variable but by various institutions that constitute it. To this end, Switzerland provides for a laboratory as its 26...

This paper assesses the effectiveness and public finance implications of the German debt brake, a constitutional balanced budget rule introduced in 2009 that aims to ensure a sustainable path of public indebtedness. In order to estimate its causal effects, our paper employs a synthetic control...

Formal fiscal rules have been introduced in many countries throughout the world. While most studies focus on intra-jurisdictional effects of fiscal rules, vertical impacts on the finances of other levels of governments have yet to be explored thoroughly. The paper investigates the influence of...

Recent theoretical research suggests that financing sub-national governments’ expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition...

Previous theoretical and empirical research has shown that policymakers have an incentive to centralize government activities in order to weaken the com-petitive pressure of fiscal federalism. We propose and test a positive model of fiscal federalism in which centralization is less likely to...

The theoretical literature on the economics of fiscal federalism has identified several potential effects of government decentralization on economic growth. Much of the traditional literature focuses on the efficiency aspects of a decentralized provision of public services. However,...

Most countries pay substantial intergovernmental transfers to poor regions. Since these transfers are often paid with the aim of achieving regional convergence, they should have a positive effect on economic growth. However, it is equally possible that transfers perpetuate under-development by...

We study the relationship between fiscal decentralization and economic growth for 23 OECD countries from 1975 to 2001 by using new panel data on sub-federal tax autonomy. While initial estimations suggest that fiscal decentralization causes lower growth rates, we find that this result is not...