Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations

Sharma, Chanchal Kumar (2010): Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations. Published in: Public Administration , Vol. 89, (6 July 2011)

Abstract

How do we know whether a country suffers from vertical fiscal imbalance (VFI)? What should be done about it? Academic appreciation of these issues in general, and the nature of political behaviour in particular, both have major implications for the way federations are fiscally structured. While the latter clearly is a problem of political negotiations, our focus is on the former, i.e., conceptual clarity, which precedes meaningful negotiations. Thus, the paper aims to clarify the multiple usages of the symbolically loaded terms VFI and VFG (Vertical Fiscal Gap) by critically engaging the fundamental assumptions and premises underlying these ostensibly similar notions. It proposes an alternative conceptual framework and introduces the concepts of Vertical Fiscal Asymmetry (VFA) and Vertical Fiscal Difference (VFD) that have the potential to better structure public debate on issues of vertical fiscal relations and stimulate a sensible appreciation of the problem and possible remedies.

• Item Type: MPRA Paper
• Language: English
• Keywords: fiscal federalism; intergovernmental relations; vertical fiscal imbalance; vertical fiscal gap; vertical fiscal gap
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations; H - Public Economics > H8 - Miscellaneous Issues > H83 - Public Administration ; Public Sector Accounting and Audits; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents

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