We investigate the impact of immigration on public budgets using administrative data from German districts (Kreise). While previous literature suggests that the fiscal benefits of migration depend on government spending responses to immigration, the local-level effects in Germany remain...

This paper revisits the fiscal decentralization theorem, by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. If instead, decisions are made by direct majority voting, (i) centralization can welfare-dominate decentralization...

Estonian municipalities should perform a broad range of functions, while their fiscal resources are often limited and large disparities in fiscal capacity prevail among them. Moreover, the power to regulate fiscal affairs is mostly in the hands of the central government. We discuss how a strict...

This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative...

We investigate the impact of foreign aid on inter-governmental transfers in India. While anecdotal evidence suggests that the central government substitutes fiscal transfers with earmarked foreign aid for state governments (fungibility), empirical evidence is scant due to the complex procedure...

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...

This paper studies Comprehensive Performance Assessment, an explicit incentive scheme for local government in England. Motivated by a simple theoretical political agency model, we predict that CPA should increase service quality and local taxation, but have an ambiguous effect on the efficiency...

We test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an...

Fiscal sustainability tests have largely ignored the institutional setting of fiscal policy making. Fiscal equalization schemes in federal states are one such institution. We examine whether German state governments pursue sustainable fiscal policies taking into account fiscal equalization...

We explore how the vertical structure of direct democracy in a federal context affects expenditure decisions of sub-central governments. In so doing we revisit previous research on the effect of direct democratic institution on public policies. Particularly, the effect of upper-level (state)...