IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwrsa/ersa06p74.html
   My bibliography  Save this paper

Grants Versus Tax Sharing: the Extent of Central Government Control

Author

Listed:
  • Graeme Roy

    ()

Abstract

By spending more than they are able to raise, sub-central governments typically depend heavily upon central transfers to meet their expenditure responsibilities. While grants remain the most popular method of transfer, the possible use of tax sharing arrangements as an alternative method of finance has received increased attention in recent years. In nearly all tax sharing systems that we are aware of, central governments play a dominant role in determining the amount of revenue each sub-central unit receives from the shared source. It has therefore, become common in the academic literature to interpret grants and tax sharing as equivalent tools of central fiscal control over sub-central tiers. However, we caution against this. In our paper, we demonstrate that only in a particular special case is it correct to conclude that the level of central control of sub-central finances is the same under a system of grants as it is under tax sharing.

Suggested Citation

  • Graeme Roy, 2006. "Grants Versus Tax Sharing: the Extent of Central Government Control," ERSA conference papers ersa06p74, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa06p74
    as

    Download full text from publisher

    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa06/papers/74.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
    2. Jon H. Fiva, 2005. "New Evidence on Fiscal Decentralization and the Size of Government," CESifo Working Paper Series 1615, CESifo Group Munich.
    3. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
    4. Isabelle Joumard & Wim Suyker, 2002. "Enhancing the Effectiveness of Public Spending in Norway," OECD Economics Department Working Papers 343, OECD Publishing.
    5. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
    6. Carl Emmerson & John Hall & Ridge, Ridge, 1998. "The impact of expenditure limitations on local government spending: evidence from the United Kingdom," IFS Working Papers W98/05, Institute for Fiscal Studies.
    7. Julia Darby & V. Anton Muscatelli & Graeme Roy, "undated". "How do Sub-Central Government react to cuts in grants received from Central Governments Evidence from a Panel of 15 OECD Countries," Working Papers 2005_18, Business School - Economics, University of Glasgow, revised Jun 2005.
    8. Perotti, Roberto, 1998. " The Political Economy of Fiscal Consolidations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 367-394, March.
    9. Julia Darby & V. Anton Muscatelli & Graeme Roy, "undated". "Fiscal Federalism and Fiscal Consolidation: Evidence from an Event Study," Working Papers 2005_21, Business School - Economics, University of Glasgow, revised Jun 2005.
    10. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, pages 217-226.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:wiw:wiwrsa:ersa06p74. 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: (Gunther Maier). General contact details of provider: http://www.ersa.org .

    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.