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Fiscal Equalisation: Some Questions of Design

Author

Listed:
  • Geoffrey Brennan

    () (Australian National University, Canberra)

  • Jonathan J. Pincus

    () (Productivity Commission, Melbourne)

Abstract

The case for fiscal equalisation can arise because of differences between states' average incomes or populations. In this paper, we examine the latter in a simple case, using different formulations of the social welfare function: Benthamite; Rawlsian; and Nash. We distinguish, in the process, two different understandings of efficiency abroad in economics — a Paretian notion, that is irrelevant to the case in hand; and a quasi-utilitarian sense. We conclude that fiscal equalisation is required only in the Rawlsian case. In all other cases, private goods consumption should be equalised — but no fiscal equalisation is required.

Suggested Citation

  • Geoffrey Brennan & Jonathan J. Pincus, 2004. "Fiscal Equalisation: Some Questions of Design," Rivista di Politica Economica, SIPI Spa, vol. 94(4), pages 79-104, July-Augu.
  • Handle: RePEc:rpo:ripoec:v:94:y:2004:i:4:p:79-104
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    Cited by:

    1. Brennan Geoffrey & Pincus Jonathan J., 2010. "Fiscal Equity In Federal Systems," Review of Law & Economics, De Gruyter, vol. 6(3), pages 347-363, December.

    More about this item

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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