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Local Fiscal Equalization in Estonia: Is a Reform Necessary?

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  • Peter Friedrich
  • Chang Woon Nam

    ()

  • Janno Reiljan

Abstract

Estonian municipalities should perform a broad range of functions, while their fiscal resources are often limited and large disparities in fiscal capacity prevail among them. Moreover, the power to regulate fiscal affairs is mostly in the hands of the central government. We discuss how a strict application of the connexity principle can protect municipalities from the fiscal bottleneck. We also recommend the introduction of the principle of parallelism and investigate its effects on the unconditional, down-flow grant system in Estonia. In particular the procedure of determining the total sum of block grants appears to be changed.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2800.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2800

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Related research

Keywords: fiscal equalization; municipal finance; connexity; principles of parallelism; Estonia;

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  1. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
  2. Peter Friedrich & Janno Reiljan, 2010. "Strategies In The Fiscal Reform Of Estonian General Education," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 73, Faculty of Economics and Business Administration, University of Tartu (Estonia).
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