ABSTRACT
The existing arrangements of fiscal federalism in Germany are heavily contested: they seem to have negative effects on fiscal discipline in the form of excessive borrowing, cause disincentives to invest or to launch structural reforms, and foster waste of public revenues (see Jeffery 2003; Baus et al. 2007). The parliamentary committee on the reform of the fiscal federal order installed in 2006 has no easy task to find answers to these problems that might lead to efficient and sustainable fiscal arrangements. I intend in this chapter to apply insights from the emerging “institutional economics of federalism” approach in general (Weingast 1995; Inman and Rubinfeld 1997; Bednar et al. 2001; Filippov et al. 2004; Rodden 2006) and Figueiredo and Weingast’s (2005; 2007) model of “self-enforcing federalism” in particular and to use a comparative point of view in order to draw lessons for the fiscal federal problems of Germany.
