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Resource Rents, Cost Differences and Fiscal Equalization

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  • JEFFREY PETCHEY

Abstract

It has been argued that the fiscal equalization process in Australia, which transfers wealth between States, has efficiency costs. Here, I show that equalization transfers can be efficiency enhancing. Further, it is shown that under certain assumptions about inter‐state differences in costs of production and resource endowments, such transfers may need to favour relatively high cost and resource rich States, such as Western Australia and Queensland, while under other assumptions about diversity, they should favour relatively resource poor and low cost States, such as Victoria and New South Wales.

Suggested Citation

  • Jeffrey Petchey, 1995. "Resource Rents, Cost Differences and Fiscal Equalization," The Economic Record, The Economic Society of Australia, vol. 71(4), pages 343-353, December.
    • Handle: RePEc:bla:ecorec:v:71:y:1995:i:4:p:343-353
    DOI: 10.1111/j.1475-4932.1995.tb02679.x
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    References listed on IDEAS

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    1. John B. Burbidge & Gordon M. Myers, 1994. "Redistribution within and across the Regions of a Federation," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 620-636, August.
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    3. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
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    5. repec:bla:scandj:v:87:y:1985:i:2:p:270-92 is not listed on IDEAS
    6. K. Hamada, 1967. "On the Optimal Transfer and Income Distribution in a Growing Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 295-299.
    7. K. Sato, 1966. "The Neoclassical Theorem and Distribution of Income and Wealth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 331-335.
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    Cited by:

    1. Fenge, Robert & Meier, Volker, 2002. "Why cities should not be subsidized," Journal of Urban Economics, Elsevier, vol. 52(3), pages 433-447, November.
    2. Nicolaas Groenewold & Alfred Hagger & John Madden, 2003. "Interregional transfers: A political-economy CGE approach," Economics of Governance, Springer, vol. 82(4), pages 535-554, November.
    3. Michael McLure, 2009. "Royalties for Regions: accountability and sustainability," Economics Discussion / Working Papers 09-05, The University of Western Australia, Department of Economics.
    4. Anping Chen & Nicolaas Groenewold, 2013. "The national and regional effects of fiscal decentralisation in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 731-760, December.
    5. Bev Dahlby & Neil Warren, 2003. "Fiscal Incentive Effects of the Australian Equalisation System," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 434-445, December.
    6. Jeffrey Petchey & Garry Macdonald Paul Koshy & Perry Shapiro, 2000. "Capital Equalization and the Australian States," The Economic Record, The Economic Society of Australia, vol. 76(232), pages 32-44, March.
    7. Nicolaas Groenewold & A.J. Hagger, 2004. "Regional Unemployment Disparities: Can Fiscal Policy Help?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 13-37, March.
    8. Anping Chen & Nicolaas Groenewold, 2011. "Regional Equality and National Development in China: Is There a Trade‐Off?," Growth and Change, Wiley Blackwell, vol. 42(4), pages 628-669, December.
    9. Hikaru Ogawa, 2004. "Fiscal Externality, Rent Sharing and Equalisation Transfers in Japan," Urban Studies, Urban Studies Journal Limited, vol. 41(1), pages 195-205, January.
    10. Nicolaas Groenewold & Alfred Hagger, 2007. "Regional Unemployment Disparities: An Evaluation of Policy Measures," Economics Discussion / Working Papers 07-05, The University of Western Australia, Department of Economics.

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