The economic forces of integration are increasingly challenging the European countries national economic policies. On the revenue side, individual governments face difficulties in raising funds from mobile tax bases such as internationally mobile capital. On the expenditure side governments are forced to take into account the effects of the supplied bundle of public goods and services on investors decisions on the location of a business.This situation of fiscal competition is sometimes regarded as beneficial since it raises the pressure on governments to increase efficiency in the public sector. However, it is also argued that competition among governments will give rise to distortions, which undermine public sector efficiency.The aim of the project is to contribute to this discussion by means of empirical research on the characteristics and consequences of fiscal competition. However, international fiscal competition is hard to analyse because of the complexities of the national tax systems and because of the difficulties to monitor transboundary factor movements. Therefore, the project exploits the fact that the lower fiscal tiers in existing federations show substantial fiscal autonomy in a highly integrated economic setting, and it studies some of the issues in greater detail at the local level. In particular, the project exploits a large panel data set of jurisdictions in Germany, which show partial autonomy in expenditures and taxation (business tax).In a first step, the focus is on the question of whether fiscal competition can be identified in the taxing and expenditure decisions of local jurisdictions and EU governments. In a second step, the fiscal consequences of the identified types of competition are explored.