The architecture of intergovernmental transfers: principles and practice in low- and middle-income countries

Countries structure their intergovernmental transfers in many different ways, depending on the objectives they wish to achieve and on how they decide to use expenditure and revenue assignments in their intergovernmental fiscal systems. The basic building blocks of the architecture of intergovernmental transfers are vertical sharing, which addresses the vertical fiscal imbalance in the system, and horizontal distribution, which addresses the reduction in fiscal disparities. The industrial countries reviewed in this volume do a good job with applying best international practices to produce reasonably efficient and equitable systems, but low- and middle-income countries are more burdened by resource constraints and weak databases to support their systems.