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Re-designing Equalization Transfers: An Application to South Africa's Provincial Equitable Share

Listed author(s):
  • James Alm

    ()

    (Department of Economics, Tulane University)

  • Jorge Martinez-Vazquez

    ()

    (Andrew Young School of Policy Studies, Georgia State University)

In this paper we examine the design of transfer systems, focusing on the Provincial Equitable Share (PES) in the Republic of South Africa. Provinces in South Africa have been assigned a wide range of responsibilities. Because provinces are almost completely reliant on transfers from the central government, the design of the PES is of critical importance, especially in its ability to achieve the goal of "equalization" across provinces. Our specific conclusion is that the PES largely fails in its efforts to equalize across provinces. Our more general conclusion that follows from this is that the PES attempts to achieve too many conflicting goals, and so it necessarily fails to achieve all goals equally or well, especially in its ability to equalize. We conclude with suggestions for ways to reform the PES to better achieve the goal of equalization, lesson that also apply to other countries.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1510.pdf
File Function: First Version, January 2015
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Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1510.

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Date of creation: Aug 2015
Handle: RePEc:tul:wpaper:1510
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  1. Hansjörg Blöchliger & Claire Charbit, 2008. "Fiscal equalisation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-22.
  2. Yonatan Fessha & Coel Kirkby, 2008. "A Critical Survey of Subnational Autonomy in African States," Publius: The Journal of Federalism, Oxford University Press, vol. 38(2), pages 248-271, Spring.
  3. James Alm & Jorge Martinez-Vazquez, 2002. "On the Use of Budgetary Norms as a Tool for Fiscal Management," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0215, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Weingast, Barry R., 2014. "Second Generation Fiscal Federalism: Political Aspects of Decentralization and Economic Development," World Development, Elsevier, vol. 53(C), pages 14-25.
  5. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
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