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Capital Equalization and the Australian States

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  • JEFFREY PETCHEY
  • GARRY MACDONALD PAUL KOSHY
  • PERRY SHAPIRO

Abstract

The Australian Grants Commission has recently considered ways to take account of differences in capital costs across States within the existing fiscal equalization formula. Here we develop a theoretical methodology for estimating differences in the costs of capital faced by the States in the General Government Sector. This methodology is used to generate preliminary estimates of State capital cost ‘disabilities’ from 1962–63 to 1995–96. Finally, we suggest how the methodology and the estimates of capital cost disabilities might be integrated into the Commission's formula to produce a grant distribution which reflects different costs of capital across States.

Suggested Citation

  • Jeffrey Petchey & Garry Macdonald Paul Koshy & Perry Shapiro, 2000. "Capital Equalization and the Australian States," The Economic Record, The Economic Society of Australia, vol. 76(232), pages 32-44, March.
    • Handle: RePEc:bla:ecorec:v:76:y:2000:i:232:p:32-44
    DOI: 10.1111/j.1475-4932.2000.tb00003.x
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    References listed on IDEAS

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    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    5. Petchey, Jeffrey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(215), pages 343-353, December.
    6. Suzanne McCoskey & Chihwa Kao, 1998. "A residual-based test of the null of cointegration in panel data," Econometric Reviews, Taylor & Francis Journals, vol. 17(1), pages 57-84.
    7. Jeffrey Petchey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 343-353, December.
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    Cited by:

    1. Castells, Antoni & Sole-Olle, Albert, 2005. "The regional allocation of infrastructure investment: The role of equity, efficiency and political factors," European Economic Review, Elsevier, vol. 49(5), pages 1165-1205, July.

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