In this paper, we take up the question why a group of sovereign countries is willing to form a federation even if residents of the high-income region suspect potential immigrants to be net beneficiaries of the tax and transfer system. We argue that income uncertainty alone cannot satisfactorily...

This paper investigates how the abolishment of a ban on tuition fees affects the quality of higher education with centralized and decentralized decision making. It is shown that tuition fees fully crowd public funds under centralization and quality of university education does not improve....

We analyze the sustainability of public finances in the 16 states (Laender) of the Federal Republic of Germany using an unprecedentedly comprehensive fiscal dataset covering the period from 1950 to 2011 for West German Laender and from 1991 to 2011 for East German Laender. As we apply unit root...

This paper provides evidence that most German states (Laender) have unsustainable public finances by exploiting a newly compiled database covering the years 1950-2011. Although the Laender are closely intertwined we are the first to apply 'second generation' panel techniques that control for...

This paper investigates the political economy of fiscal reform activism in Argentina since the late 1980s. Between 1988 and 2008, tax legislation was changed 83 times, fiscal federal rules 14 times, and budgetary institutions sixteen times. Tax and budgetary reforms moved from centralizing...

We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of taxation differs across levels of government because voters internalize general equilibrium effects at the central but not at the local level. This renders the degree of tax...

We use a novel approach to address the question of whether a union of sovereign countries can efficiently raise and allocate a budget, even when members are purely self-interested and participation is voluntary. The main innovation of our model is to explore the link between budget contributions...

We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are rationally internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government....

The political blessings of federalism are the core of our discussion. These benefits are operationalized as the decrease in the number of outvoted in a federal system with majority voting as an important source of regime satisfaction. The approach originates from the work of Roland Pennock who...

Federal action addressing climate change is likely to emerge either through new legislation or via the U.S. EPA's authority under the Clean Air Act. The prospect of federal action raises important questions regarding the interconnections between federal efforts and state-level climate policy...