Capital Transfers and Equalization: An Application to Spanish Regions
This paper analyzes the main design issues for utilizing capital transfers with an equalization objective within a system of sub-national finance. Although there is a vast literature and ample policy practice with the design of equalization grants involving needs for recurrent expenditures and/or fiscal capacity associated with current revenues, there is a dearth in the fiscal federalism literature at both the theoretical design and actual practice levels on how to use capital transfers with an interregional equalization objective. The two main aims of this paper are first, at the conceptual level, to identify the singular characteristics of capital expenditures and capital financing sources that would allow quantifying capital expenditure needs and financing capacity across sub-national jurisdictions; and second, by incorporating those measures into a capital equalization transfer formula to apply the design framework at the regional level in Spain.
|Date of creation:||23 Jul 2010|
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