Fiscal Equalisation: Principles and an Application to the European Union

Journal article

Publication Details

Author(s): Hayo B, Wrede M
Journal: Social Choice and Welfare
Publisher: Springer Verlag (Germany)
Publication year: 2004
Volume: 23
Pages range: 333-348
ISSN: 0176-1714
Language: English


The paper derives a normative model for partial fiscal equalisation based on a number of axioms and makes special allowance for the existence of a specific fiscal need in the jurisdictions. A simple version of this idealised equalisation scheme relates net contributions to the equalisation funds to deviations of a jurisdiction’s gross income from average gross income and a jurisdiction’s specific needs from average specific needs. 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.

FAU Authors / FAU Editors

Wrede, Matthias Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Sozialpolitik

How to cite

Hayo, B., & Wrede, M. (2004). Fiscal Equalisation: Principles and an Application to the European Union. Social Choice and Welfare, 23, 333-348.

Hayo, Bernd, and Matthias Wrede. "Fiscal Equalisation: Principles and an Application to the European Union." Social Choice and Welfare 23 (2004): 333-348.


Last updated on 2018-19-04 at 03:02