A theoretical model describes the local choice of the tax rate on capital income. It establishes preferences and various fiscal conditions - including the tax rates of competing jurisdictions - as determinants of the tax rate. The empirical implications are tested using a large panel of...

The number of parties in government is usually considered to increase spending. We show that this is not necessarily the case. Using a new method to detect close election outcomes in multi-party systems, we isolate truly exogenous variation in the type of government. With data from...

This paper analyzes the occurrence of political budget cycles in 604 West German cities between 1975 and 2007. Due to the idiosyncratic timing of state and local elections, the budgetary changes before elections at two tiers of the federalist government can be separately estimated and can also...

We advance the literature on political budget cycles by testing separately for cycles in expenditures for elections in the legislative and the executive. Using municipal data, we can separately identify these cycles and account for general year effects. For the executive branch, we show that it...

Cooperative fiscal federalism needs a multi-level consent to decide on the allocation of intergovernmental transfers. We study how parliamentary representation of municipalities on the federal level influences the allocation of federal transfers to municipal governments under this type of...

In 2009 a new law on German debt brakes was passed: state governments are not allowed to run structural deficits after 2020. Consolidation strategies initiated today influence if a state can comply with the debt brake in 2020. We describe to what extent government ideology predicts if state...

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...

Marginal rates of contribution (MRC), i.e., the rates at which additional revenues are skimmed via larger contributions or lower transfer receipts, quantify the incentives of a fiscal equalization scheme. The present paper is the first to calculate marginal rates of contribution for the Laender...

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 studies the importance of politician's qualification, in terms of education and experience, for fiscal outcomes. The analysis is based on a large panel for 2,031 German municipalities for which we have collected information on municipal budgets as well as the election results and...