This paper investigates the causal effects of central-to-local government transfers on local economic activity in Ecuador, utilizing exogenous variation from a reform in the intergovernmental transfer formula implemented in 2018. Addressing gaps in the fiscal decentralization literature, this...

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...

The paper addresses the welfare implications of conditional grants in the presence of inefficiencies in regional production. While conditional grants may set incentives for regions to reduce inefficiencies, resources are wasted in the process of grant-seeking. We provide a theoretical model to...

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 report on the nature of a utility optimizing transfer from one regional government to another when local public goods are present. Computer examples reveal that small differences in regional endowments result in large differences in equilibrium outcomes for two regions, under optimal...

In einer Regressionsanalyse werden mögliche Determinanten kommunaler Verschuldung untersucht. Von erheblicher Bedeutung sind die SGBII-Quote und das Zusammenspiel aus Einwohnerzahl und Einwohnerdichte. Zudem spielt die Länderzugehörigkeit der Kommunen eine große Rolle. Unterschiede gibt es...

In this paper we examine financial interactions between tiers of government. Whilst most existing empirical evidence has focused on the US, it is difficult to generalize conclusions obtained to countries where the position and remit of lower tiers of government is evolving or is less clear...

Empirical evidence from the U.S. and the European Union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution. This paper presents an argument in favor of such differentiated budgetary...

This paper adds to the literature by utilizing improved data on tax revenue decentralization to re-examine the relationship between fiscal decentralization and the size of government. An econometric analysis using panel data from 18 OECD countries shows that fiscal decentralization matters for...