Publication: Public Services and Expenditure Need Equalization : Reflections on Principles and Worldwide Comparative Practices
Date
2012-03
ISSN
Published
2012-03
Author(s)
Abstract
This paper reviews the conceptual
challenges as well as lessons from worldwide experiences in
implementing public services and expenditure need
compensation in fiscal equalization transfers with a view to
developing guidance for practitioners. The paper concludes
that while in theory a strong case for a comprehensive
fiscal equalization can be made, in practice fiscal need
equalization as part of a comprehensive equalization program
introduces significant complexity. This works against the
simplicity, transparency and general acceptability of the
program. This does not imply that fiscal need equalization
should be abandoned in the interest of simplicity and
transparency. Instead simplicity, transparency and local
autonomy are preserved by having fiscal need equalization
through public service oriented (specific purpose block
transfers) output based fiscal transfers that impose no
spending requirements for any functions or objects of
expenditures. Such transfers contrast with traditional
earmarked transfers, which impose conditions on spending for
specific purposes or objects of expenditure and subsequent
verification/certification of such expenditures. Such
output-based block transfers would further enhance citizen
based accountability for results and thereby offer potential
for enhancing public confidence and trust in government operations.
Citation
“Shah, Anwar. 2012. Public Services and Expenditure Need Equalization : Reflections on Principles and Worldwide Comparative Practices. Policy Research Working Paper;No. 6006. © World Bank, Washington, DC. http://hdl.handle.net/10986/19875 License: CC BY 3.0 IGO.”
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