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Public Spending on the State Level: Classic Determinants and the Federal Bargain in Five Federations, 1991-2005

Björn Egner
Technische Universität Darmstadt
Björn Egner
Technische Universität Darmstadt
Open Panel

Abstract

State spending policy scarcely constitutes an object for research in political science, but also in economics, despite that the state level in federal systems does cause a considerable share of overall spending. If public spending at the state level is scrutinized, analysis is restricted to states within one federal system in most cases. I try to go a step further by comparing explanatory approaches for state spending over states within one country, but also compare their explanatory power between countries (comparison of comparisons). The main question is: How can variances in public spending on the state level in federal systems be explained? In order to answer this question, public spending of all 117 subnational units from six mature federations (US, Switzerland, Canada, Germany, Australia and Austria) over 15 years will be analysed. The paper adapts determinants identified to be decisive for public spending on the national level to the state level in federal systems. It also develops a set of determinants which are connected to the “federal bargain”, i.e. the political interactions in federal states concerning multi-level fiscal relationships. The article finds that state public spending is hardly following the logic of general public spending, but is heavily dependent on macroeconomic context conditions and the vertical integration provided by political parties.