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Expenditure-Based Equalization Transfers

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  • Francois Vaillancourt
  • Richard Bird

    ()
    (Rotman School of Management, University of Toronto)

Abstract

This paper is divided into three main sections. In the first section, we set out briefly the standard theoretical case for both a general equalization transfer and for the incorporation of expenditure needs as a key factor in the design of such transfers and discuss how this case may be implemented. In the second section, we review how and to what extent expenditure factors are actually incorporated in a few selected equalization schemes around the world. Finally, in the last section we consider critically the relevance of assessing differentials in expenditure needs in determining equalization transfers. Our aim is to set forth in brief compass some general guidelines that may be useful to the many countries currently facing the need to establish sounder intergovernmental fiscal transfer systems in order to ensure that the outcome of decentralization is broadly economically and socially beneficial

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Bibliographic Info

Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0512.

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Length: 30 Pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:ttp:itpwps:0512

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Keywords: fiscal equalization; fiscal capacity; expenditure needs; intergovernmental transfers;

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References

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  1. 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.
  2. 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.
  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. 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.
  5. 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.
  6. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series 1289, The World Bank.
  7. Oakland, William H., 1994. "Fiscal Equalization: An Empty Box?," National Tax Journal, National Tax Association, vol. 47(1), pages 199-209, March.
  8. L. S. Wilson, 2003. "Equalization, Efficiency and Migration: Watson Revisited," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 385-395, December.
  9. 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.
  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. 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.
  12. A. D. Scott, 1952. "Federal Grants and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 60, pages 534.
  13. World Bank, 2002. "Brazil : Issues in Fiscal Federalism," World Bank Other Operational Studies 15417, The World Bank.
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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. Fraschini, Angela, 2006. "Fiscal federalism in big developing countries: China and India," POLIS Working Papers 60, Institute of Public Policy and Public Choice - POLIS.
  3. 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.
  4. World Bank, 2012. "Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform," World Bank Other Operational Studies 11869, The World Bank.
  5. 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.
  6. 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.

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