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The Vertical Fiscal Gap in the German Federation

Thiess Buettner & Vincent Herdegen

Public Finance Analysis / FinanzArchiv2025https://doi.org/10.1628/fa-2026-0009article
AJG 1ABDC B
Weight
0.50

What the paper says

The paper examines the magnitude of the vertical fiscal gap in Germany and its developmentover time and explores the drivers of this development from re-unification in 1991until today. The results indicate a declining trend of the vertical fiscal gap. In the lastdecade, less than 10% of total subnational government expenditure is covered by verticalfederal grants, over 90% is financed with own revenues, which is a large share by internationalstandards. This development partly reflects fiscal consolidation but, primarily,is caused by an increase in revenue decentralization, fueled in particular by an increaseof the subnational share of VAT revenues. We also explore how the vertical fiscal gapvaries by state and find that the small gap for the country as a whole masks importantdifferences across states. Half of all states display a substantial vertical fiscal gap, rangingbetween about 27% and 38%. Two states display a negative fiscal gap indicating thatthey transfer part of their own revenues to the federation.

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https://doi.org/https://doi.org/10.1628/fa-2026-0009

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@article{thiess2025,
  title        = {{The Vertical Fiscal Gap in the German Federation}},
  author       = {Thiess Buettner & Vincent Herdegen},
  journal      = {Public Finance Analysis / FinanzArchiv},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1628/fa-2026-0009},
}

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The Vertical Fiscal Gap in the German Federation

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.