Fiscal Federalism in Four Federal Countries

Tuomo Virkola

No 38, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract This paper provides a characterization of the fiscal policy framework in four established federal countries with heterogeneous intergovernmental relations and demographic characteristics: Canada, Germany, Switzerland and the United States. We consider the implications of fiscal federalism from three different perspectives. First, we study the allocation of expenditure responsibilities and revenue generating instruments to different levels of government (federal, state and local) and discuss the role of intergovernmental transfers schemes and fiscal rules in each country. Second, we study the implementation of macroeconomic stabilization policy across different levels of government. Third, we discuss the evidence on the degree of inter-state risk sharing and the role of federal transfers in smoothing regional income shocks in federal countries. We conclude with the main implications to the euro area and to the debate on common fiscal instruments.

Keywords: Fiscal federalism; Fiscal union; Risk sharing (search for similar items in EconPapers)
JEL-codes: E62 F45 H60 H70 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2014-10-31
New Economics Papers: this item is included in nep-eec, nep-mac and nep-ure
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