Germany`s disappointing economic performance causes political upsets. If the next government intents to be more successfull than the current one, fundamental reforms are to be enforced. Germany`s inadequate federal system is a major growth obstacle. The country forgoes the benefits of...

In this article we examine whether or not the small size (in terms of population) of some German Laender (states) is harmful. The economic theory of federalism forms the ground on which we present empirical evidence, focusing on our own results for the German Laender. We find evidence that...