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Re-designing equalization transfers: an application to South Africa provincial equitable share

Author

Listed:
  • James Alm

    (Tulane University, USA)

  • Jorge Martinez-Vazquez *

    (Georgia State University, USA)

Abstract

In this paper we examine the design of transfer systems, focusing on the Provincial Equitable Share (PES) in the Republic of South Africa. Provinces in South Africa have been assigned a wide range of responsibilities. Because provinces are almost completely reliant on transfers from the central government, the design of the PES is of critical importance, especially in its ability to achieve the goal of equalization across provinces. Our specific conclusion is that the PES largely fails in its efforts to equalize across provinces. Our more general conclusion that follows from this is that the PES attempts to achieve too many conflicting goals, and so it necessarily fails to achieve all goals equally or well, especially its ability to equalize. We conclude with suggestions for ways to reform the PES to better achieve the goal of equalization, lesson that also apply to other countries.

Suggested Citation

  • James Alm & Jorge Martinez-Vazquez *, 2015. "Re-designing equalization transfers: an application to South Africa provincial equitable share," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 1-22, January-M.
    • Handle: RePEc:jda:journl:vol.49:year:2015:issue1:pp:1-20
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    References listed on IDEAS

    as
    1. Brian Dollery, 0. "An Initial Evaluation of Revenue-Sharing Arrangements in the New South African Fiscal Federalism," Publius: The Journal of Federalism, CSF Associates Inc., vol. 28(2), pages 129-153.
    2. Hansjörg Blöchliger & Claire Charbit, 2008. "Fiscal equalisation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-22.
    3. Roy Bahl (ed.), 2003. "Restructuring Local Government Finance in Developing Countries," Books, Edward Elgar Publishing, number 2930.
    4. Yonatan Fessha & Coel Kirkby, 2008. "A Critical Survey of Subnational Autonomy in African States," Publius: The Journal of Federalism, CSF Associates Inc., vol. 38(2), pages 248-271, Spring.
    5. Jameson Boex & Jorge Martinez-Vazquez, 2007. "Designing Intergovernmental Equalization Transfers with Imperfect Data: Concepts, Practices, and Lessons," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 291-343, Springer.
    6. James Alm & Jorge Martinez-Vazquez, 2002. "On the Use of Budgetary Norms as a Tool for Fiscal Management," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0215, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
    8. Weingast, Barry R., 2014. "Second Generation Fiscal Federalism: Political Aspects of Decentralization and Economic Development," World Development, Elsevier, vol. 53(C), pages 14-25.
    9. Jorge Martinez-Vazquez & Bob Searle, 2007. "Challenges in the Design of Fiscal Equalization and Intergovernmental Transfers," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 3-10, Springer.
    10. Godfrey R.A. Dunkley, 2000. "Republic of South Africa," American Journal of Economics and Sociology, Wiley Blackwell, vol. 59(5), pages 299-311, November.
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    Cited by:

    1. Jason Delaney, 2019. "Comparing Apples to Apples: Estimating Fiscal Need in the United States with a Regression-Based Representative Expenditure Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 311-322, September.
    2. Muinelo-Gallo, Leonel & Rodriguez-Miranda, Adrián & Castro-Scavone, Pablo, 2017. "Intergovernmental transfers and regional income inequalities in Uruguay," MPRA Paper 76983, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal Decentralization; Equalization; Fiscal Capacity; Expenditure Norms;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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