Financing Confederation: Principles and Practices of Equalization

Norrie, Kenneth; Percy, Majella; Wilson, Leonard S.

doi:10.2307/3549401

Cited by 7 publications

(8 citation statements)

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“…Horizontal fiscal disparities are the difference between the expenditure needs and the fiscal capacity of a sub-national government (Norrie et al, 1982;Le Grand, 1975;Porto and Rosales, 2008). If expenditure needs exceed fiscal capacity, the local government requires transfers to cover such needs.…”

Section: The Theory and Practice Of Horizontal Fiscal Disparitiesmentioning

confidence: 99%

“…There are two reasons why it is important to measure and design strategies to eliminate horizontal fiscal inequalities (Auld and Eden, 1987;Dahlby and Wilson, 1994;Boadway et al, 1983;Norrie et al, 1982). The first is economic efficiency: municipalities or departments with more resources can attract immigrants from other jurisdictions given their ability to provide more and better public goods and services, generating fiscally-induced migration (Dahlby and Wilson, 1994).…”

Section: Introductionmentioning

confidence: 99%

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The territorial fiscal gap in Colombia

Ayala‐García¹,

Bonet²

2017

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This paper presents an estimation of expenditure needs and fiscal capacity of Colombia's municipalities and departments in 2014. We use standard per capita norms to estimate the spending needs and data envelopment analysis for the local fiscal capacity. The results show that: (i) there are high horizontal fiscal disparities in Colombia, with greater incidence in municipalities than in departments; (ii) these disparities favor more developed territories; and (iii) there is evidence of a centerperiphery pattern in the horizontal fiscal disparities, causing central regions of the country to have a lower imbalance between expenditure needs and fiscal capacity. An equalization transfers system is an option for public policy to eliminate these disparities.Keywords: horizontal fiscal disparities, fiscal capacity, fiscal needs, data envelopment analysis.JEL Classification: H71, H73, H77, R12.sub-national governments (Dirección General de Apoyo Fiscal, 2009;Bonet et al, 2014.;Villa et al., 2014).The main purpose of this paper is to measure horizontal fiscal disparities in Colombia, taking into account expenditure needs and fiscal capacity jointly both for municipalities and departments. This study contributes to the discussion of fiscal disparities and transfer systems. Based on the results, there will be an estimate of the territorial fiscal gap, understood as the difference between expenditure needs and local potential revenue in each territory. This estimate will provide ground for discussion about the need to implement a transfer system with fiscal equalization in Colombia.This document consists of six sections. The second one presents a review of existing literature on the estimation of horizontal fiscal disparities, explaining the advantages and disadvantages of each method. The third section presents the methodology we followed to calculate expenditure needs and fiscal capacity. The fourth part presents and analyzes the results, while the fifth discusses a possible reform of the country's current fiscal transfers system. Finally, the sixth presents the conclusions and recommendations. The Theory and Practice of Horizontal Fiscal DisparitiesHorizontal fiscal disparities are the difference between the expenditure needs and the fiscal capacity of a sub-national government (Norrie et al., 1982;Le Grand, 1975;Porto and Rosales, 2008). If expenditure needs exceed fiscal capacity, the local government requires transfers to cover such needs. On the contrary, if a territory has a higher fiscal capacity than needs, it is able to transfer resources to other jurisdictions to reduce the fiscal gap.

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Section: The Theory and Practice Of Horizontal Fiscal Disparitiesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The territorial fiscal gap in Colombia

Ayala‐García¹,

Bonet²

2017

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“…Las disparidades fiscales horizontales se definen como la diferencia entre las necesidades de gasto y la capacidad fiscal de un gobierno subnacional (Norrie et al, 1982;Le Grand, 1975;Porto y Rosales, 2008). Si la necesidad de gasto excede la capacidad fiscal, entonces el gobierno local requiere de transferencias que le permitan cubrir sus necesidades.…”

Section: La Teoría Y La Práctica Sobre Las Disparidades Fiscales Horiunclassified

“…Existen dos razones por las cuales es importante medir y diseñar estrategias para eliminar las desigualdades fiscales horizontales (Auld y Eden, 1987;Dahlby y Wilson, 1994;Boadway et al, 1983;Norrie et al, 1982). La primera de ellas es la eficiencia económica, según la cual municipios o departamentos con más recursos pueden atraer inmigrantes de otras jurisdicciones debido a su capacidad para ofrecer más y mejores bienes y servicios públicos, generando así la migración fiscalmente inducida (Dahlby y Wilson, 1994).…”

Section: Introductionunclassified

La brecha fiscal territorial en Colombia

Bonet¹,

Ayala‐García²

2016

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La brecha fiscal territorial en Colombia ResumenEste trabajo presenta una estimación de las necesidades de gasto y de la capacidad fiscal de los municipios y departamentos de Colombia para el año 2014. Para estimar la primera se emplea la norma de gasto por habitante, mientras que el análisis envolvente de datos se usa para estimar la segunda. Los resultados muestran que existen disparidades fiscales horizontales en Colombia con mayor incidencia en los municipios que en los departamentos, y que estas son en mayores en los territorios con mayor atraso relativo. Se encontró evidencia de un patrón centro periferia en las brechas fiscales territoriales, donde regiones del centro del país registran menores desequilibrios entre sus necesidades de gasto y su capacidad para generar recursos propios. Un sistema de transferencias de igualación que cubra esas brechas sería la opción una política pública viable para corregirlas.Palabras clave: disparidades fiscales horizontales, capacidad fiscal, necesidad de gasto, análisis envolvente de datos. AbstractIn this paper, we present an estimation of expenditure needs and fiscal capacity of Colombia's municipalities and departments in 2014. We use standards per capita norms to estimate the spending needs and data envelopment analysis for the local fiscal capacity. The results show that there are high horizontal fiscal disparities in Colombia with the greater incidence in the municipalities than in the departments, and that these disparities are in favor of more developed territories. There is also evidence of a center-periphery pattern in the horizontal fiscal disparities, where central regions of the country have lower imbalance between spending needs and their ability to generate their own resources. An equalization transfers system is an option for public policy to eliminate these disparities.

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“…There are two reasons why it is important to measure and design strategies to eliminate horizontal fiscal inequalities (Auld & Eden, ; Boadway, Flatters, & Leblanc, ; Dahlby & Wilson, ; Norrie, Percy, & Wilson, ). The first is economic efficiency: municipalities or departments with more resources can attract immigrants from other jurisdictions given their ability to provide more and better public goods and services, generating fiscally‐induced migration (Dahlby & Wilson, ).…”

Section: Introductionmentioning

confidence: 99%