Public Expenditure Dynamics in Federal and Sub-central Budgets in Light of a Task-orientated Vertical Revenue Assignment

The planned fundamental reform of the Fiscal Equalisation Scheme includes a step towards stronger task orientation. Against this background the study describes and analyses developments of main functional expenditure categories in federal, Länder and local budgets, and identifies spending shifts between governmental tiers, mainly at the expense of Länder and local budgets. The main drivers are expenditure for hospital services and social benefits. In this context the study also discusses challenges for a task orientation caused by these dynamics which have not attracted too much attention in the empirical debate yet.