Standortwettbewerb der Bundesländer

Norbert Berthold, Holger Fricke and Matthias Kullas

No 80, Discussion Paper Series from Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy

Abstract: 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 institutional competition, that would result in a higher level of efficiency. As mobility within the federal republic is higher than between countries, competition among the German Länder could be more challenging than between Germany and its foreign trade partners. Thus, vivid competition on the level of the Länder would strengthen the incentives to perform an effective policy and wipe out inefficiencies, for example those being due to the political process. Though the most important political issues are shaped on the federal level, some political scope for the Länder governments remains. This holds true especially as far as the administration rather than the legislative is concerned. The study "Die Bundesländer im Standortwettbewerb" evaluates the political success of the German Länder. It reveals, that the different performance of the Länder is also due to different Länder policies. Bavaria and Baden-Wuerttemberg are the two most successful Flächenländer (non-city states), and they are the two Länder with the most consequent policies as well. To enhence the beneficial effects of institutional competition, a comprehensive reform has to widen the political scope of the Länder. Competences are to be disentengled. With the concept of the FOCJ (functional, overlapping, competing jurisdictions), Frey an Eichenberger propose to decentralize competences radically and enhence institutional competition to a maximum level.

Date: 2005
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