this pattern and tests them in a natural experiment from Germany. The first hypothesis is that fiscal redistribution … the perspective of local governments; the second is that a desire for redistribution within jurisdictions induces a shift … taxation serves as a Pigouvian intervention to correct externalities. The empirical analysis supports redistribution between …

, while achieving regional redistribution, seem to impede output growth and promote an quot;immiserising convergencequot …

shock. We also find that the bulk of fiscal adjustment takes place via a rise in government revenue rather than a cut in …-to-GDP ratio from rising as a consequence of the shock. Sub-dividing our sample, we also find that for countries participating in … Economic and Monetary Union (EMU) the primary balance response to a cost of borrowing shock was stronger in the period after …