Handbook of Fiscal Federalism
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Handbook of Fiscal Federalism

Edited by Ehtisham Ahmad and Giorgio Brosio

This major Handbook addresses fiscal relations between different levels of government under the general rubric of ‘fiscal federalism’, providing a review of the latest literature as well as an invaluable guide for practitioners and policy makers seeking informed policy options. The contributors include leading lights in the field, many of whom have themselves made seminal contributions to the literature.
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Chapter 7: Contract Federalism

Paul Bernd Spahn


Paul Bernd Spahn Introduction A fundamental reform of existing federal arrangements is especially difficult. Although one could agree that federal constitutions are neither optimal nor forward looking, reflecting past developments and disregarding future challenges, a complete redesign of these arrangements is illusive given that they constitute the very foundation on which the state and intergovernmental relations are built. The constitutional core is almost ‘cast in stone’, and radical reforms are possible only after catastrophes such as wars. Even then there is need for extensive political compromise. Contracts between governments at different levels are increasingly being used to address weaknesses in the existing intergovernmental structures. This represents a consensual attempt to replace otherwise hierarchical relationships, and also reflects increasing autonomous decision-making capabilities at the subnational level. This chapter explores some of the consequences of contracts on future intergovernmental relations to render public service delivery more effective and responsive to modern challenges. Individualistic versus corporatist views of the state Alliances and other forms of cooperation across public entities are as old as humanity. They were typically created among states sharing common interests such as religious worship and defense of the region. A famous example is the Delian League (fifth and fourth century BC), a confederation of Greek city states under the leadership of Athens for the purpose of protecting the region against intruders from Persia. Another is the Latin League, a cooperation of cities in Latium that was formed against enemies such as the Etruscans, Volscians and the Aequians. However, such confederations...

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