Fiscal Equalization and Yardstick Competition

Christos Kotsogiannis and Robert Schwager

No 1865, CESifo Working Paper Series from CESifo

Abstract: A multi-jurisdictional system is thought to improve, through yardstick competition, accountability. At the same time equalization programs, a common feature of multi-jurisdictional systems, are thought to be a prerequisite for both efficiency of the internal market and the equity objective of the equal treatment of equals. This paper shows that such programs, by reducing the information context of comparisons across jurisdictions, introduce perverse fiscal incentives and thus reduce accountability. The consequence of this is that equilibrium rent-taking increases with the intensity of equalization transfers.

Keywords: equalization transfer programs; fiscal capacity; rent-seeking; fiscal federalism (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Fiscal Equalization and Yardstick Competition (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1865

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