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A structural approach for analyzing fiscal equalization

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  • Audun Langørgen

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Abstract

Many countries apply cost equalization and/or fiscal capacity equalization formulas to enable subnational governments to provide comparable service standards at comparable tax rates. This paper demonstrates how measures of expenditure needs and fiscal capacity can be derived from a structural model of local government spending and taxing behavior. The structural parameters are shown to provide the information required to implement equalization defined as a balance between the principles of horizontal equity and local autonomy. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Audun Langørgen, 2015. "A structural approach for analyzing fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(3), pages 376-400, June.
  • Handle: RePEc:kap:itaxpf:v:22:y:2015:i:3:p:376-400
    DOI: 10.1007/s10797-014-9317-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal equalization; Horizontal equity; Local autonomy; Expenditure needs; Fiscal capacity; Structural modeling; H71; H72;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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