6533b873fe1ef96bd12d4bff

RESEARCH PRODUCT

A general framework for the analysis of fiscal equalisation systems

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This paper shows that, despite the existing diversity of models of fiscal equalisation, there is a common underlying structure that links all of them. To this end, a framework of analysis sufficiently general so as to encompass the main schemes present in the literature is developed. This allows to uncover the common features of these schemes and to identify more readily the origin and nature of their differences. The formal approach is complemented with a numerical simulation of the models considered. The paper also shows the usefulness of the approach for reform policy and suggests two new models.