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Countries differ in their governmental architectures and in the rules that describe the allocation of tasks, rights and duties throughout the various levels of government. The theory of fiscal federalism addresses issues such as the optimal design of the financial structure within a federal state (e.g., intergovernmental transfers and fiscal equalization schemes) and its impact on policy experimentation, government accountability on a local level as well as international competition. The research professorship, which originates from the work of the former unit “Market Processes and Governance”, hosts a small doctoral program in cooperation with the Berlin Doctoral Program in Economics and Management Science together with network partners at the ifo Dresden, ZEW Mannheim and Freie Universität Berlin.