Federalism in (Corona-)Crisis

Against the backdrop of the economic theory of federalism, the author examines whether decentralized powers in infection control at the state level are less efficient than centralized powers at the federal level. He reveals that preferences varied relatively widely among the states with respect to the type and extent of pandemic response during the Corona crisis. Therefore, federal responsibility for infection control likely resulted in welfare gains, especially since decentralized responsibilities for infection control allowed for productive competition among the states for appropriate solutions. In contrast, adverse externalities of pandemic response at the state level can be kept within narrow bounds by limiting transregional mobility. Therefore, in the author's view, a shift of responsibilities for infection control to the federal level is more harmful than beneficial from an efficiency perspective. A uniform federal "emergency brake", as introduced by the federal government in April 2021, appears to be useless at best in view of economic efficiency criteria.