 Rescuing the concept of vertical fiscal imbalanceMPRA Paper from University Library of Munich, Germany Abstract: This article restores the concept of vertical fiscal imbalance (VFI) to its original meaning. The literature shows that there is neither a universally accepted definition of VFI nor a commonly accepted approach to measuring it. Estimates of VFI are derived, much like accounting or deficit measurements, by comparing the revenues and expenditures of two levels of government. VFI is, however, too nuanced an issue to be described by this kind of national accounting procedure. We argue that ease of measurement should always take second place to the appropriateness of the economic concepts used; it makes no sense to adopt a definition that is convenient for measurement if it does not have a sound theoretical basis. The conventional definition of VFI however, falls into this trap, and the ad hoc definition was adopted for its expedience. This measure does not reflect whether taxes and expenditures across the various levels of government are too high, too low or about right. Unfortunately, the sacrifice of rigour for tractability has seriously harmed the quality of public policy debate on the issue. Keywords: iscal federalism; intergovernmental relations; vertical fiscal imbalance; vertical fiscal gap (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39343 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.