Abstract
In its 1993 reform of the intergovernmental grant system, Sweden adopted an ambitious program of fiscal equalisation, one which is among the most comprehensive in the developed world. This paper examines the structure of equalisation in Sweden. I focus on the overall effectiveness of the program, and the incentives built into its major components; capacity equalisation, cost equalisation, and capitation aid. Incentives for individual and firm location, and the fiscal behavior of municipalities are considered. I argue that some of these incentives are positive, while other effects may be adverse. The variety of possible effects in the Swedish system illustrates the potential tradeoffs between equity and efficiency in a fiscal system. Where possible, I adduce evidence as to the actual responses to these incentives. The paper also considers the mix of equalisation policies, and the extent to which substitution between one or another component is either possible or desirable. At various points, comparisons are made to other fiscal systems around the world.
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Chernick, H. (2004). Fiscal Equalisation Between Swedish Municipalities. In: Molander, P. (eds) Fiscal Federalism in Unitary States. ZEI Studies in European Economics and Law, vol 6. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0503-7_4
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DOI: https://doi.org/10.1007/978-1-4615-0503-7_4
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