IDEAS home Printed from https://ideas.repec.org/p/nsw/discus/10.html
   My bibliography  Save this paper

The Fiscal Incentive Effects of the Australian Equalisation System

Author

Listed:
  • Bev Dahlby and Neil Warren

    (Department of Economics, University of Alberta, Canada; ATAX, University of New South Wales)

Abstract

Equalisation grants can affect a state's fiscal behaviour because its tax policies can affect the size of its grant. For a large state, an increase in its tax rate will increase the standard tax rate used to calculate the grant for that base and thereby reduce (increase) the state's grant if it has a high (low) relative fiscal capacity with respect to that base. In addition, a state's grant will increase if its relative fiscal capacity declines when it raises an additional tax revenue. Our econometric results indicate that the equalisation system may have affected the Australian state's choice of tax rates

Suggested Citation

  • Bev Dahlby and Neil Warren, 2002. "The Fiscal Incentive Effects of the Australian Equalisation System," Taxation Discussion Paper #10, ATAX, University of New South Wales.
  • Handle: RePEc:nsw:discus:10
    as

    Download full text from publisher

    File URL: http://www.atax.unsw.edu.au/research/RePEc/discus/ATAXDiscussionPaperNo10.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Thomas J. Courchene & David A. Beavis, 1973. "Federal-Provincial Tax Equalization: An Evaluation," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 483-502, November.
    2. Nicolaas Groenewold & Alfred J Hagger & John R Madden, 2002. "The Efficiency of Federal Inter-Regional Transfers Under a Regime of Politically-Maximizing Regional Governments," Economics Discussion / Working Papers 02-03, The University of Western Australia, Department of Economics.
    3. Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo.
    4. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
    5. Petchey, Jeffrey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(215), pages 343-353, December.
    6. Winer, Stanley L. & Hettich, Walter, 1998. "What Is Missed if We Leave Out Collective Choice in the Analysis of Taxation," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(2), pages 373-389, June.
    7. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
    8. Winer, Stanley L. & Hettich, Walter, 1998. "What Is Missed If We Leave Out Collective Choice in the Analysis of Taxation," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 373-89, June.
    9. Jeffrey Petchey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 343-353, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robin Boadway & Katherine Cuff, 2017. "The impressive contribution of Canadian economists to fiscal federalism theory and policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1348-1380, December.
    2. Buettner, Thiess, 2006. "The incentive effect of fiscal equalization transfers on tax policy," Journal of Public Economics, Elsevier, vol. 90(3), pages 477-497, February.
    3. Leonzio Rizzo, 2006. "Le inefficienze della competizione fiscale: una rassegna dei principali modelli teorici," Economia politica, Società editrice il Mulino, issue 1, pages 89-120.
    4. Albouy, David, 2012. "Evaluating the efficiency and equity of federal fiscal equalization," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 824-839.
    5. Thiess Büttner & Sebastian Hauptmeier & Robert Schwager, 2006. "Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany," CESifo Working Paper Series 1656, CESifo.
    6. Michael Smart, 2007. "Raising Taxes through Equalization," CESifo Working Paper Series 1926, CESifo.
    7. Hindriks, Jean & Peralta, Susana & Weber, Shlomo, 2008. "Competing in taxes and investment under fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2392-2402, December.
    8. Sam Bucovetsky & Michael Smart, 2006. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 119-144, January.
    9. Robin Boadway & Jean-Francois Tremblay, 2005. "A Theory of Vertical Fiscal Imbalance," Working Papers 2006-04, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    10. Yongzheng Liu, 2014. "Does competition for capital discipline governments? The role of fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 345-374, June.
    11. Kothenburger, Marko, 2004. "Tax competition in a fiscal union with decentralized leadership," Journal of Urban Economics, Elsevier, vol. 55(3), pages 498-513, May.
    12. Marko Köthenbürger, 2002. "Tax Competition and Fiscal Equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 391-408, August.
    13. Yongzheng Liu & Jorge Martinez-Vazquez & Alfred M. Wu, 2017. "Fiscal decentralization, equalization, and intra-provincial inequality in China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 248-281, April.
    14. Anping Chen & Nicolaas Groenewold, 2011. "Regional Equality and National Development in China: Is There a Trade‐Off?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 628-669, December.
    15. Büttner Thiess & Schwager Robert, 2003. "Länderautonomie in der Einkommensteuer: Konsequenzen eines Zuschlagsmodells / Income Tax Autonomy of German States: Reform Options and Consequences," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(5), pages 532-555, October.
    16. Robert Fenge & Volker Meier, 2001. "Why Cities Should not be Subsidized," CESifo Working Paper Series 546, CESifo.
    17. Volkerink, Bjørn & Haan, Jakob de, 1999. "Political and institutional determinants of the tax mix : an empirical investigation for OECD countries," Research Report 99E05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    18. Jean Hindriks & Gareth D. Myles, 2003. "Strategic Inter–Regional Transfers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 229-248, April.
    19. Michael Smart, 1996. "Taxation incentives and deadweight loss in a system of intergovernmental transfers," Working Papers msmart-96-03, University of Toronto, Department of Economics.
    20. Matthias Wrede, 2014. "Agglomeration, tax competition, and fiscal equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(6), pages 1012-1027, December.

    More about this item

    Keywords

    fiscal federalism; federal grants; equalisation; marginal cost of funds; taxation;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nsw:discus:10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Research Assistant) The email address of this maintainer does not seem to be valid anymore. Please ask Research Assistant to update the entry or send us the correct email address. General contact details of provider: http://edirc.repec.org/data/atnswau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.