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The Principles of Parallel Development of Fiscal Capacity between State and Municipalities as Useful Benchmarks for the Determination of the Inter-governmental Grants in Germany

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  • Chang Woon Nam
  • Rüdiger Parsche
  • Matthias Steinherr

Abstract

The conventional theoretical and empirical references related to the inter-governmental fiscal transfer system in Germany appear to heavily concentrate on the issues surrounding the measurement of local expenditure needs of a municipality and their coverage through the down-flow grants when the municipal tax revenue is insufficient to match the needs. This study introduces additional important research fields in this context. Firstly, it attempts to analyse the role of the development of tax revenue and fiscal power of the grant provider (the State) as well as the joint financial relationship between the State and (different types of rural and urban) municipalities in the determination of inter-governmental grants. Secondly, when the total volume of the State grants is determined, this study examines in the next step under the particular consideration of different tax capacities in varied categories of municipalities, how this amount should be horizontally distributed among these groups to achieve the equal growth of hypothetical per capita fiscal capacity.

Suggested Citation

  • Chang Woon Nam & Rüdiger Parsche & Matthias Steinherr, 2001. "The Principles of Parallel Development of Fiscal Capacity between State and Municipalities as Useful Benchmarks for the Determination of the Inter-governmental Grants in Germany," European Planning Studies, Taylor & Francis Journals, vol. 9(4), pages 525-537, June.
    • Handle: RePEc:taf:eurpls:v:9:y:2001:i:4:p:525-537
    DOI: 10.1080/09654310124603
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    References listed on IDEAS

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    1. Shah, Anwar, 1991. "Perspectives on the design of intergovernmental fiscal relations," Policy Research Working Paper Series 726, The World Bank.
    2. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series 1289, The World Bank.
    3. Charles M. Tiebout, 1961. "An Economic Theory of Fiscal Decentralization," NBER Chapters, in: Public Finances: Needs, Sources, and Utilization, pages 79-96, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Chang Woon Nam & Rüdiger Parsche & Bettina Reichl, 2001. "Municipal finance and governance in Poland, the Slovak Republic, the Czech Republic, and Hungary," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 2, July.
    2. Peter Friedrich & Chang Woon Nam & Janno Reiljan, 2010. "Local Fiscal Equalization In Estonia: Is A Reform Necessary?," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 22(2‐3), pages 165-180, July.
    3. Rüdiger Parsche & Chang Woon Nam & Ingo Wagner & Frank Zander, 2002. "The Municipal Fiscal Equalisation System in Saxony," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 10, July.

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