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Expenditure-Based Equalization Transfers

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Author Info

  • Francois Vaillancourt
  • Richard M.Bird

Abstract

Intergovernmental transfers are a major source of revenue for sub-national (regional and local) governments (hereafter SNG), representing 60 percent of their total revenue for developing countries and 33 percent for OECD countries (Shah, 2004). The continued and even growing decentralization observed in many countries calls for a better understanding of the design, role and impact of fiscal transfers. Prominent among the objectives commonly attributed to intergovernmental fiscal transfers is ‘equalization’ although exactly what this term means is often rather obscure and may differ from country to country or even over time within any one country. Our focus in this paper is specifically on those transfers specifically labeled as equalization transfers and in particular on the question of the extent to which and the method by which differences in expenditure ‘needs’ can and should be formally incorporated into such transfers.

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Bibliographic Info

Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0410.

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Length: 33 pages
Date of creation: 01 Nov 2004
Date of revision:
Handle: RePEc:ays:ispwps:paper0410

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Keywords: Expenditure; Equalization Transfers; Intergovernmental transfers; sub-national government;

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References

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  1. A. D. Scott, 1952. "Federal Grants and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 60, pages 534.
  2. L. S. Wilson, 2003. "Equalization, Efficiency and Migration: Watson Revisited," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 385-395, December.
  3. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Oakland, William H., 1994. "Fiscal Equalization: An Empty Box?," National Tax Journal, National Tax Association, vol. 47(1), pages 199-209, March.
  5. Charles E. McLure, Jr. & Jorge Martinez-Vazquez, 1998. "Intergovernmental Fiscal Relations in Vietnam," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9802, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
  7. William G. Watson, 1986. "An Estimate of the Welfare Gain from Fiscal Equalization," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 298-308, May.
  8. World Bank, 2002. "Brazil : Issues in Fiscal Federalism," World Bank Other Operational Studies 15417, The World Bank.
  9. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series 1289, The World Bank.
  10. Richard A. Musgrave, 1961. "Approaches to a Fiscal Theory of Political Federalism," NBER Chapters, in: Public Finances: Needs, Sources, and Utilization, pages 97-134 National Bureau of Economic Research, Inc.
  11. Jeff Petchey & Sophia Levtchenkova, 2004. "Fiscal Capacity Equalization and Economic Efficiency," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0415, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  12. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  13. Teresa Garcia-Milà & Therese J. McGuire, 2002. "Fiscal decentralization in Spain: An asymmetric transition to democracy," Economics Working Papers 866, Department of Economics and Business, Universitat Pompeu Fabra.
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Citations

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Cited by:
  1. Sergey Sinelnikov & Pavel Kadochnikov & Ilya Trunin, 2008. "From Elections to Appointments of the Regional Governors: Major Challenges and Outcomes," Published Papers 2, Gaidar Institute for Economic Policy, revised 2008.
  2. Shah, Anwar, 2012. "Public services and expenditure need equalization : reflections on principles and worldwide comparative practices," Policy Research Working Paper Series 6006, The World Bank.
  3. World Bank, 2012. "Arab Republic of Egypt - Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform, Volume 1," World Bank Other Operational Studies 11903, The World Bank.
  4. José R. Molinas Vega & Ricardo Paes de Barros & Jaime Saavedra Chanduvi & Marcelo Giugale & Louise J. Cord & Carola Pessino & Amer Hasan, 2012. "Do Our Children Have a Chance? A Human Opportunity Report for Latin America and the Caribbean," World Bank Publications, The World Bank, number 2374, October.
  5. Fraschini, Angela, 2006. "Fiscal federalism in big developing countries: China and India," POLIS Working Papers 60, Institute of Public Policy and Public Choice - POLIS.
  6. World Bank, 2012. "Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform," World Bank Other Operational Studies 11869, The World Bank.

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