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Intergovernmental Transfers: The Funding Rule and Mechanisms


  • Paul Bernd Spahn



The paper categorizes different types of intergovernmental transfers, discusses the funding rule of grants, and outlines some principles for setting up transfer allocation mechanisms that respect hard budget constraints at the macroeconomic level. The mechanics of a neutral transfer scheme aiming at budget equalization is sketched using data for a fictional developing country, Krakozhia, which aims at implementing an incentive compatible methodology for allocating transfers to its provinces.

Suggested Citation

  • Paul Bernd Spahn, 2004. "Intergovernmental Transfers: The Funding Rule and Mechanisms," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0417, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0417

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    Intergovernmental fiscal relations; transfers; grants; decentralization; equalization;

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