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Intergovernmental Transfers: The Vertical Sharing Dimension

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Abstract

There are two dimensions to the structure of an intergovernmental transfer: the vertical share and the horizontal share (Bahl and Linn, 19921). The vertical share is the total pool of funds to be allocated to subnational governments, while the horizontal shares are the amounts received by eligible local governments. Most research (and most political attention) is devoted to the latter. The subject of this paper is vertical sharing. We have three goals. The first is a quantitative analysis of trends and cross-country variations in vertical sharing. In particular, we are interested in what explains the vertical share and whether there has been an increase in the importance of intergovernmental fiscal transfers and in the question of what explains the cross-country variations in this importance. The second is a description of the range of the practice in vertical sharing. Finally, we offer some criteria by which the impact of vertical sharing might be evaluated.

Suggested Citation

  • Roy Bahl & Sally Wallace, 2004. "Intergovernmental Transfers: The Vertical Sharing Dimension," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0419, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper0419
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    References listed on IDEAS

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    1. M Govinda Rao, 1999. "Principles of Intergovernmental Transfers:Have the Finance Commissions Followed Them?," Working Papers 47, Institute for Social and Economic Change, Bangalore.
    2. Linda Andersson & Thomas Aronsson & Magnus Wikstr–m, 2004. "Testing for Vertical Fiscal Externalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 243-263, May.
    3. Michael Keen, 1998. "Vertical Tax Externalities in the Theory of Fiscal Federalism," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 454-485, September.
    4. Jorge Martinez-Vazquez & Jameson Boex, 1999. "Fiscal Decentralization in the Russian Federation During the Transition," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9903, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Prud'homme, Remy, 1995. "The Dangers of Decentralization," The World Bank Research Observer, World Bank, vol. 10(2), pages 201-220, August.
    6. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 397-412, July.
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    Cited by:

    1. Audun Langørgen, 2015. "A structural approach for analyzing fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 376-400, June.
    2. Juan Luis Gomez & Jorge Martinez-Vazquez & Cristian Sepúlveda, 2011. "Reining in Provincial Fiscal ‘Owners’: Decentralization in Lao PDR," Chapters, in: Jorge Martinez-Vazquez & François Vaillancourt (ed.), Decentralization in Developing Countries, chapter 6, Edward Elgar Publishing.
    3. Roy Bahl & Geeta Sethi & Sally Wallace, 2009. "West Bengal: Fiscal Decentralization to Rural Governments: Analysis and Reform Options," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0907, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Mr. Luc Eyraud & Ms. Lusine Lusinyan, 2011. "Decentralizing Spending More Than Revenue: Does it Hurt Fiscal Performance?," IMF Working Papers 2011/226, International Monetary Fund.
    5. World Bank, 2007. "China : Improving Rural Public Finance for the Harmonious Society," World Bank Publications - Reports 7664, The World Bank Group.
    6. Darshini J S & K Gayithri, 2019. "Fiscal dependency of States in India," Working Papers 433, Institute for Social and Economic Change, Bangalore.
    7. Yu, Bingxin & Chen, Kevin Z. & Zhang, Yumei & Zhang, Haisen, 2014. "Evolving public expenditure in Chinese agriculture: Definition, pattern, composition, and mechanism:," IFPRI discussion papers 1407, International Food Policy Research Institute (IFPRI).
    8. Gustavo Canavire-Bacarreza & Nicolas Guadalupe Zuniga Espinoza, 2010. "Fiscal Transfers a Curse or Blessing? Evidence of Their Effect on Tax Effort for Municipalities in Sinaloa, Mexico," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1030, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. Ms. Izabela Karpowicz, 2012. "Narrowing Vertical Fiscal Imbalances in Four European Countries," IMF Working Papers 2012/091, International Monetary Fund.
    10. Gu, Gyun Cheol, 2012. "Developing Composite Indicators for Fiscal Decentralization: Which Is The Best Measure For Whom?," MPRA Paper 43032, University Library of Munich, Germany.

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    Keywords

    Intergovernmental Transfers; Vertical Sharing Dimension; subnational government; local government;
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