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Fiscal equalisation: Principles and an application to the European Union

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  • Hayo, Bernd
  • Wrede, Matthias

Abstract

The paper derives a normative model for partial fiscal equalisation based on a number of axioms and makes special allowance for the existence of a specific fiscal need in the jurisdictions. A simple version of this idealised equalisation scheme relates net contributions to the equalisation funds to deviations of a jurisdiction’s gross income from average gross income and a jurisdiction’s specific needs from average specific needs. The theoretical model is then empirically tested for the case of the European Union using data from 1986-97. It is found that most restrictions of the model appear to hold, in particular, relatively richer countries contribute more and those with greater fiscal needs, approximated by the importance of the agricultural sector, pay less. However, in the EU, an adjustment of net payments to changes in the actual importance of the specific fiscal need for a country is lacking. --

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Bibliographic Info

Paper provided by Bamberg University, Bamberg Economic Research Group in its series BERG Working Paper Series with number 38.

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Date of creation: 2001
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Handle: RePEc:zbw:bamber:38

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Postal: D-96045 Bamberg
Phone: 0951/8632687
Fax: 0951/8632550
Web page: http://www.uni-bamberg.de/vwl/forschung/berg/
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Keywords: Fiscal Equalisation; European Union;

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References

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  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Young, H. P., 1988. "Distributive justice in taxation," Journal of Economic Theory, Elsevier, vol. 44(2), pages 321-335, April.
  3. Buhl, Hans Ulrich & Pfingsten, Andreas, 1990. "On the distribution of public funds," European Journal of Political Economy, Elsevier, vol. 6(3), pages 363-376, December.
  4. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  5. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
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Cited by:
  1. Wenzel, Heinz-Dieter & Lackenbauer, Jörg & Brösamle, Klaus J., 2004. "Public Debt and the Future of the EU's Stability and Growth Pact," BERG Working Paper Series 50, Bamberg University, Bamberg Economic Research Group.
  2. Bexheti, Abdulmenaf, 2010. "Anti-crisis measures in the republic of Macedonia and their effects: Are they sufficient?," BERG Working Paper Series 70, Bamberg University, Bamberg Economic Research Group.
  3. Hopp, Stefan, 2004. "J.-B. Say's 1803 Treatise and the Coordination of Economic Activity," BERG Working Paper Series 47, Bamberg University, Bamberg Economic Research Group.
  4. Franke, Reiner & Westerhoff, Frank, 2011. "Why a simple herding model may generate the stylized facts of daily returns: Explanation and estimation," BERG Working Paper Series 83, Bamberg University, Bamberg Economic Research Group.
  5. Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Alfarano, Simone & Milakovic, Mishael, 2010. "Identification of Interaction Effects in Survey Expectations: A Cautionary Note," MPRA Paper 26002, University Library of Munich, Germany.
  7. Imami, Drini & Lami, Endrit & Kächelein, Holger, 2011. "Political cycles in income from privatization: The case of Albania," BERG Working Paper Series 77, Bamberg University, Bamberg Economic Research Group.
  8. Kächelein, Holger, 2003. "Fiscal competition on the local level: May commuting be a source of fiscal crises?," BERG Working Paper Series 45, Bamberg University, Bamberg Economic Research Group.
  9. Szüle, Borbála, 2003. "Inside financial conglomerates: Effects in the Hungarian pension fund markets," BERG Working Paper Series 42, Bamberg University, Bamberg Economic Research Group.
  10. Gervai, Pál & Trautmann, László & Wieszt, Attila, 2010. "The mission and culture of the corporation," BERG Working Paper Series 74, Bamberg University, Bamberg Economic Research Group.
  11. Franke, Reiner & Westerhoff, Frank, 2012. "Structural stochastic volatility in asset pricing dynamics: Estimation and model contest," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1193-1211.
  12. Kächelein, Holger & Imami, Drini & Lami, Endrit, 2008. "A new view into political business cycles: Household expenditures in Albania," BERG Working Paper Series 60, Bamberg University, Bamberg Economic Research Group.
  13. Eckel, Carsten, 2009. "International trade and retailing," BERG Working Paper Series 63, Bamberg University, Bamberg Economic Research Group.
  14. Kächelein, Holger, 2004. "Capital Tax Competition and Partial Cooperation : Welfare Enhancing or not?," BERG Working Paper Series 51, Bamberg University, Bamberg Economic Research Group.
  15. Seregi, János & Lelovics, Zsuzsanna & Balogh, László, 2012. "The social welfare function of forests in the light of the theory of public goods," BERG Working Paper Series 87, Bamberg University, Bamberg Economic Research Group.

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