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Resource Rents, Cost Differences and Fiscal Equalization

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  • Petchey, Jeffrey

Abstract

It has been argued that the fiscal equalization process in Australia, which transfers wealth between states, has efficiency costs. Here, the author shows that equalization transfers can be efficiency enhancing. Further, it is shown that, under certain assumptions about interstate differences in costs of production and resource endowments, such transfers may need to favor relatively high cost and resource rich states, such as Western Australia and Queensland, while, under other assumptions about diversity, they should favor relatively resource poor and low cost states, such as Victoria and New South Wales. Copyright 1995 by The Economic Society of Australia.

Suggested Citation

  • Petchey, Jeffrey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(215), pages 343-353, December.
  • Handle: RePEc:bla:ecorec:v:71:y:1995:i:215:p:343-53
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    Cited by:

    1. Michael McLure, 2009. "Royalties for Regions: accountability and sustainability," Economics Discussion / Working Papers 09-05, The University of Western Australia, Department of Economics.
    2. Anping Chen & Nicolaas Groenewold, 2013. "The national and regional effects of fiscal decentralisation in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 731-760, December.
    3. Anping Chen & Nicolaas Groenewold, 2014. "The regional economic effects of a reduction in carbon emissions and an evaluation of offsetting policies in China," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 429-453, June.
    4. Nicolaas Groenewold & Alfred Hagger & John Madden, 2003. "Interregional transfers: A political-economy CGE approach," Papers in Regional Science, Springer;Regional Science Association International, vol. 82(4), pages 535-554, November.
    5. N. Groenewold & A.J. Hagger, 2008. "Regional Unemployment Disparities: An Evaluation Of Policy Measures ," Australian Economic Papers, Wiley Blackwell, vol. 47(4), pages 355-375, December.
    6. Fenge, Robert & Meier, Volker, 2002. "Why cities should not be subsidized," Journal of Urban Economics, Elsevier, vol. 52(3), pages 433-447, November.
    7. Anping Chen & Nicolaas Groenewold, 2011. "Regional Equality and National Development in China: Is There a Trade‐Off?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 628-669, December.
    8. Nicolaas Groenewold & Alfred Hagger, 2007. "Regional Unemployment Disparities: An Evaluation of Policy Measures," Economics Discussion / Working Papers 07-05, The University of Western Australia, Department of Economics.

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