Fiscal Equalisation: Principles and an Application to the European Union

30 Pages Posted: 13 Jan 2002

See all articles by Bernd Hayo

Bernd Hayo

University of Marburg - School of Business & Economics

Matthias Wrede

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2003

Abstract

The paper derives a normative model for partial fiscal equalisation based on a number of axioms and allows for the existence of a specific fiscal need in the jurisdictions. The theoretical model is then empirically tested for the case of the European Union using data from 1986-97. It is found that most restrictions of the model appear to hold, in particular, relatively richer countries contribute more and those with greater fiscal needs, approximated by the importance of the agricultural sector, pay less. However, in the EU, an adjustment of net payments to changes in the actual importance of the specific fiscal need for a country is lacking.

Keywords: Fiscal Equalisation, European Union

JEL Classification: H77, H87

Suggested Citation

Hayo, Bernd and Wrede, Matthias, Fiscal Equalisation: Principles and an Application to the European Union (January 2003). Available at SSRN: https://ssrn.com/abstract=296480

Bernd Hayo

University of Marburg - School of Business & Economics ( email )

Universitaetsstr. 24
Marburg, D-35032
Germany
++49(0)6421-28-23091 (Phone)
++49(0)6421-28-23193 (Fax)

Matthias Wrede (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics ( email )

Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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