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Is Vertical Fiscal Imbalance so Inefficient? or, The Flypaper Effect is not an Anomaly

Author

Listed:
  • Geoffrey Brennan
  • Jonathan Pincus

    (School of Economics, University of Adelaide)

Abstract

This paper re-examines criticisms made of vertical fiscal imbalance in Australian and other federations. We argue that one of the central criticisms made of vertical fiscal imbalance is unproven. Vertical fiscal imbalance occurs when the central government collects more taxes than it spends on its own purposes; when that states collect less in tax than they spend; and the differences represent grants from the central government to the states (and local governments).

Suggested Citation

  • Geoffrey Brennan & Jonathan Pincus, 1998. "Is Vertical Fiscal Imbalance so Inefficient? or, The Flypaper Effect is not an Anomaly," School of Economics and Public Policy Working Papers 1998-06, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:1998-06
    as

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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp1998-06.pdf
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    Citations

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    Cited by:

    1. Evgeny N. Timushev, 2017. "Flypaper Effect: Causes and Demonstration in the Budgetary System of Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 60-70, October.
    2. Santiago Lago, "undated". "Descentralización fiscal, nivelación interterritorial y externalidades presupuestarias: Perspectiva analítica y reflexiones para el caso espanol," Studies on the Spanish Economy 130, FEDEA.

    More about this item

    Keywords

    Australia; public finance;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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