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Expenditure-Based Equalization Transfers

Author

Listed:
  • Francois Vaillancourt
  • Richard Bird

    () (Rotman School of Management, University of Toronto)

Abstract

This paper is divided into three main sections. In the first section, we set out briefly the standard theoretical case for both a general equalization transfer and for the incorporation of expenditure needs as a key factor in the design of such transfers and discuss how this case may be implemented. In the second section, we review how and to what extent expenditure factors are actually incorporated in a few selected equalization schemes around the world. Finally, in the last section we consider critically the relevance of assessing differentials in expenditure needs in determining equalization transfers. Our aim is to set forth in brief compass some general guidelines that may be useful to the many countries currently facing the need to establish sounder intergovernmental fiscal transfer systems in order to ensure that the outcome of decentralization is broadly economically and socially beneficial

Suggested Citation

  • Francois Vaillancourt & Richard Bird, 2005. "Expenditure-Based Equalization Transfers," International Tax Program Papers 0512, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  • Handle: RePEc:ttp:itpwps:0512
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    File URL: http://www-2.rotman.utoronto.ca/iib/ITP0512.pdf
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    References listed on IDEAS

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    1. Robin Boadway, 2004. "The Theory and Practice of Equalization," CESifo Economic Studies, CESifo, vol. 50(1), pages 211-254.
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    3. A. D. Scott, 1952. "Federal Grants and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 60, pages 534-534.
    4. World Bank, 2002. "Brazil : Issues in Fiscal Federalism," World Bank Other Operational Studies 15417, The World Bank.
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    6. Shah, Anwar & DEC, 1994. "A fiscal needs approach to equalization transfers in a decentralized federation," Policy Research Working Paper Series 1289, The World Bank.
    7. Oakland, William H., 1994. "Fiscal Equalization: An Empty Box?," National Tax Journal, National Tax Association, vol. 47(1), pages 199-209, March.
    8. 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.
    9. L. S. Wilson, 2003. "Equalization, Efficiency and Migration: Watson Revisited," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 385-395, December.
    10. Teresa Garcia-Milà & Therese J. McGuire, 2007. "Fiscal Decentralization in Spain: An Asymmetric Transition to Democracy," Chapters,in: Fiscal Fragmentation in Decentralized Countries, chapter 7 Edward Elgar Publishing.
    11. Jeff Petchey & Sophia Levtchenkova, 2004. "Fiscal Capacity Equalization and Economic Efficiency," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0415, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    12. William G. Watson, 1986. "An Estimate of the Welfare Gain from Fiscal Equalization," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 298-308, May.
    13. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. World Bank, 2012. "Reshaping Egypt's Economic Geography : Domestic Integration as a Development Platform," World Bank Other Operational Studies 11869, The World Bank.
    5. Fraschini, Angela, 2006. "Fiscal federalism in big developing countries: China and India," POLIS Working Papers 60, Institute of Public Policy and Public Choice - POLIS.

    More about this item

    Keywords

    fiscal equalization; fiscal capacity; expenditure needs; intergovernmental transfers;

    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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