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We investigate the effect of general-purpose transfers on different expenditure categories and tax rates in the municipalities of Saxony (eastern Germany) and North Rhine-Westphalia (western Germany). Findings from the panel data analysis suggest the existence of the "flypaper effect" -...
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We investigate how lump-sum equalization transfers affect expenditures and taxes in the municipalities of the largest German state North Rhine-Westphalia. In general, those general-purpose transfers cannot be treated as exogenous variables. Thus, for the identification of causal effects, two...
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The implicit idea underlying theories of fiscal federalism is that fiscal decentralization can change the composition … of government expenditure. That is, regardless of whether decentralization enables governments to more readily reflect … decentralization with respect to allocative efficiency by examining the relationship between fiscal decentralization and expenditure …
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