Wirtschaftswissenschaft
Isabella Lehmann, Matthias Wrede
The Bavarian Municipal Fiscal Equalization Scheme: Emphasis on Equity Rather than Efficiency
Jahrgang 75 (2019) / Heft 2,
S. 127-151 (25)
Publiziert 06.02.2019
Employing the approach of Albouy (2012), this paper evaluates the efficiency and equity of the municipal fiscal equalization scheme in the federal state of Bavaria in Germany. Calculating a measure reflecting the internalization of fiscal and real externalities by state grants, we conduct a regression analysis on variables describing efficiency and equity criteria. Because the fiscal equalization scheme redistributes revenues toward regions with low realized incomes and a larger population share of low-productivity residents, the scheme satisfies certain equity criteria. However, the fiscal equalization scheme likely does not internalize local public-good externalities and therefore hampers spatial efficiency.