The agony of central power: Fiscal federalism in the German Reich

Carsten Hefeker

European Review of Economic History, 2001, vol. 5, issue 1, 119-142

Abstract: This article revisits the German system of fiscal federalism between unification in 1871 and hyper-inflation in 1923. I argue that the ill designed fiscal system led to systematically excessive debt for the Reich. The system was the outcome of overlapping distributional conflicts between centre and states, and between capital and labour. It was also responsible for the debt problems arising in World War I and the unsuccessful attempts at fiscal reforms during and after the war. Ultimately, these distributional conflicts contributed to the hyper-inflation in Germany. The German example also has implications for the debate about fiscal federalism in the European Union.

Date: 2001
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