Geoscience Reference
In-Depth Information
(Biehl and Ungar
1991
: 39-65). First, those l ander whose fiscal capacity is
below the mean receive a compensatory transfer from the richer l ander to raise
their capacity to that level. For those l ander whose fiscal capacity is between
92% of the mean fiscal capacity and the mean itself, a transfer is made for
the value of 36.5 %(37.5% since the 1987 reform) of the difference between
their level and the mean. Lander whose fiscal capacity lies between 100% and
102% of the mean neither receive transfers nor contribute to FA. Only those
l ander with a fiscal capacity above 102% have to provide funds for horizontal
equalization: if their fiscal capacity is between 102% and 110% of the mean,
they contribute 70% of the difference. The contribution to FA is 100%ofthe
difference in relation to the mean only if the fiscal capacity of the land is greater
than 110% of the mean fiscal capacity.
In a second step, the system aims at increasing the fiscal capacity of all
l ander with a low fiscal capacity up to 95% of the mean. Here, the indicator
of fiscal capacity as derived from the first stage is compared with the indica-
tor of expenditure needs. Those l ander whose fiscal capacity is higher than
their expenditure needs finance further contributions in favor of the weaker
ones. However, this equalizing principle has a limit, the so-called Hansestadt
Klausel
4
: after the second stage is implemented, no contributor land can end
up with its fiscal capacity reduced below the mean (before the 1987 reform this
limit was 95% of the mean itself). Should this be the case, it would receive an
extra payment to raise its levels to the mean.
The history of Germany's fiscal structure before 1990 reveals a system that is
stable in its basic parameters but rife with contestation over its implementation
and performance, contestation often triggered by a changing economic geogra-
phy due to structural transformations. The latter changed the relative positions
of the l ander, thus opening the door to a series of conflicts about the need and
direction of potential reform. During the 1970s and 80s, deindustrialization
hit those l ander whose economic structures were more heavily based on man-
ufacturing industries, namely Bremen, Saarland, North Rhine Westphalia and
Lower Saxony, harder. The major consequence was the emergence of a North-
South divide among the l ander that made the former demand more resources
with which to face the burdens derived from the new structural conditions.
This income effect (differential in the value of w
r
in the model) led them to
request more redistribution of capacities from their partners in the federation.
This is even more the case because, consistent with the model, the structural
economic transformations, by way of highlighting the differences in economic
and labor market structures, led the federation to transfer a larger share of the
responsibility of several welfare state programs to the l ander.
5
In Benz's words,
“efforts to modernize the welfare state and to adapt its structures, procedures
4
It refers to the city-states Hamburg and Bremen.
5
As Degg has put it, “the task of managing the industrial adjustment in Germany is falling
increasingly to subnational political and economic actors” (Degg
1996
: 28). See also Anderson
(
1992
).
