EconPapers    
Economics at your fingertips  
 

Fiscal Equalisation and the Soft Budget Constraint

Robert C. Plachta

No 08-8, FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge from University of Cologne, FiFo Institute for Public Economics

Abstract: This paper assesses the interactions of horizontal fiscal equalisation schemes with debt policy by sovereign regional governments. Local public goods are either financed by debt or taxation. A horizontal equalisation scheme eleviates regional public revenue disparities under horizontal and vertical tax competition. We show that fiscal equalisation schemes have no impact on the optimal central government grant whereas they can either soften or harden the regional budget constraint depending on the specific formulae. Revenue equalisation softens the budget constraint whereas tax base equalisation hardens the budget constraint of poor states.

Keywords: Fiscal federalism; public debt; soft budget constraint; fiscal equalisation; tax competition (search for similar items in EconPapers)
JEL-codes: H7 E62 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-acc, nep-cba, nep-mac, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/27681/1/FiFo-CPE-DP_08-08.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:uoccpe:7451

Access Statistics for this paper

More papers in FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge from University of Cologne, FiFo Institute for Public Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2021-01-25
Handle: RePEc:zbw:uoccpe:7451