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Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals' actions. How should society decide these issues? This paper compares three regimes (centralization, decentralization and federalism) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. The main results are: (i) A move from decentralization to federalism, called moral federalism, is welfare improving behind the veil of ignorance if and only if centralization dominates decentralization, and (ii) for the group that favors a restrictive policy moral federalism is the more attractive the smaller its group size (subject to being the majority group), the larger the suffering from a given policy, and the smaller the regions' weight in determining the federal policy limit. The results are consistent with the Bush administration's attempt to restrict liberal policy choices at the state level after its narrow election victory in 2000.

Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals' actions. How should society decide these issues? This paper compares three regimes (centralization, decentralization and federalism) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. The main results are: (i) A move from decentralization to federalism, called moral federalism, is welfare improving behind the veil of ignorance if and only if centralization dominates decentralization, and (ii) for the group that favors a restrictive policy moral federalism is the more attractive the smaller its group size (subject to being the majority group), the larger the suffering from a given policy, and the smaller the regions' weight in determining the federal policy limit. The results are consistent with the Bush administration's attempt to restrict liberal policy choices at the state level after its narrow election victory in 2000.

This paper models tax competition between two countries that are divided into regions. In the first stage of the game, the strategy variable for each country is the division of the provision of a continuum of public goods between the central and regional governments. In the second stage, the central and regional governments choose their tax rates on capital. A country's decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exist under tax competition. In contrast to standard tax competition models, decentralizing the provision of public goods may be welfare-enhancing.

Under extraterritorial sanctions the sanctioning country extends its policies to trade of third countries with the sanctioned country. A prominent example is former US President Trump's decision to leave the Joint Comprehensive Plan of Action (JCPOA), a multilateral agreement with Iran. The decision led to a shutdown of EU trade with Iran. In this paper, I develop a game-theoretic model to explain the emergence of extraterritorial sanctions. Such trade sanctions i) do not arise when the harmful activity of the sanctioned country ("build a nuclear bomb") is verifiable even if monetary transfers are ruled out, but ii) emerge if a second activity ("sponsor international terrorism") is not verifiable, and the sanctioning countries differ in their gains from trade with the sanctioned country, their harm from the non-verifiable, and their reputational cost from abandoning the international economic order. In the context of the US-Iran-EU conflict, I argue that the oil and gas fracking boom in the US together with former President Trump's ignorance of his international reputation are key factors in the emergence of extraterritorial trade sanctions.

Die öffentlichen Haushalte befinden sich gegenwärtig in einem guten Zustand, der finanzielle Spielräume eröffnet. Finanzpolitik darf sich jedoch nicht nur an kurzfristig positiven Indikatoren orientieren, sondern muss dauerhaft stabile Finanzen garantieren, insbesondere in einem föderalen Staat wie Deutschland. Dabei spielen fiskalische Regeln wie die deutsche Schuldenbremse und die aus dem europäischen Kontext entstandenen Verpflichtungen aus dem Stabilitäts- und Wachstumspakt sowie dem Fiskalvertrag eine wichtige Rolle. Die deutsche Finanzpolitik sollte die institutionellen Strukturen der Finanzpolitik weiterentwickeln. Diese Aussage mag vor dem Hintergrund der gerade erfolgten Neuordnung des Bund-Länder-Finanzausgleichs vom Sommer 2017 zunächst überraschen. Dennoch ist sie berechtigt, denn der fiskalpolitische Gestaltungsspielraum der Länder wird trotz vermehrter Transfers durch den Bund ab 2020 zusammen mit dem Wirken der Schuldenbremse bei weiterhin geringer Steuerautonomie eingeschränkt.

Legal conflicts between multinational firms and host governments are often decided by international arbitration panels known as Investor State Dispute Settlements (ISDS). Critics fear that ISDS favors multinational firms, and make s governments reluctant to adopt appropriate policies (regulatory chill). I develop an economic model to analyze regulatory chill and show under which conditions a move to ISDS is beneficial.