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Expenditure-Based Equalization Transfers

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  • Francois Vaillancourt
  • Richard M.Bird

Abstract

Intergovernmental transfers are a major source of revenue for sub-national (regional and local) governments (hereafter SNG), representing 60 percent of their total revenue for developing countries and 33 percent for OECD countries (Shah, 2004). The continued and even growing decentralization observed in many countries calls for a better understanding of the design, role and impact of fiscal transfers. Prominent among the objectives commonly attributed to intergovernmental fiscal transfers is ‘equalization’ although exactly what this term means is often rather obscure and may differ from country to country or even over time within any one country. Our focus in this paper is specifically on those transfers specifically labeled as equalization transfers and in particular on the question of the extent to which and the method by which differences in expenditure ‘needs’ can and should be formally incorporated into such transfers.

Suggested Citation

  • Francois Vaillancourt & Richard M.Bird, 2004. "Expenditure-Based Equalization Transfers," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0410, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0410
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp0410.pdf
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    References listed on IDEAS

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    1. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    4. Robin Boadway, 2004. "The Theory and Practice of Equalization," CESifo Economic Studies, CESifo, vol. 50(1), pages 211-254.
    5. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series 1289, The World Bank.
    6. Richard A. Musgrave, 1961. "Approaches to a Fiscal Theory of Political Federalism," NBER Chapters,in: Public Finances: Needs, Sources, and Utilization, pages 97-134 National Bureau of Economic Research, Inc.
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    Cited by:

    1. World Bank, 2012. "Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform," World Bank Other Operational Studies 11869, The World Bank.
    2. José R. Molinas Vega & Ricardo Paes de Barros & Jaime Saavedra Chanduvi & Marcelo Giugale & Louise J. Cord & Carola Pessino & Amer Hasan, 2012. "Do Our Children Have a Chance? A Human Opportunity Report for Latin America and the Caribbean," World Bank Publications, The World Bank, number 2374.
    3. World Bank, 2012. "Arab Republic of Egypt - Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform, Volume 1," World Bank Other Operational Studies 11903, The World Bank.
    4. Fraschini, Angela, 2006. "Fiscal federalism in big developing countries: China and India," POLIS Working Papers 60, Institute of Public Policy and Public Choice - POLIS.
    5. Shah, Anwar, 2012. "Public services and expenditure need equalization : reflections on principles and worldwide comparative practices," Policy Research Working Paper Series 6006, The World Bank.

    More about this item

    Keywords

    Expenditure; Equalization Transfers; Intergovernmental transfers; sub-national government;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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