ÖFFENTLICHES FINANZSYSTEM UND REGIONALE EFFIZIENZ

Ulrich VAN Suntum

Kyklos, 1981, vol. 34, issue 2, 216-229

Abstract: The paper argues that shortcomings with respect to regional allocation are often due to misconstructions of fiscal adjustment and therefore must not be looked upon as market failures. The main argument is based on Buchanan's principle of fiscal equity as a guide to fiscal adjustment, which usually is not applied in existing fiscal systems. It is argued, that the common interpretation of Buchanan's principle in terms of benefits is misleading. Thus an interpretation in terms of costs is presented the essence of which is to provide a ‘right to generate public costs’ which is equal for ‘equals’ in any of a state's regions. Finally it is shown that on certain conditions a system of fiscal decentralization will generate exactly those results to be desired with respect to efficient regional adjustment. It is concluded therefore, that there is no general trade off concerning regional efficiency and fiscal federalism respectively; rather the opposite seems to be the case.

Date: 1981
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