An equalisation grant is intended to even out the differences in cost and income that occur between different local governments, and which are not due to differences in the scope of the services provided. Open-ended matching grants counteract this intention. Such grants provide local authorities with the opportunity of offering a higher level of service without imposing a correspondingly higher rate of tax. It is mainly authorities with a high-tax capacity that have the financial ability to take advantage of this opportunity. Open-ended grants neutralise in this way the income distributive effects of the tax equalisation grant. An evaluation of Swedish data confirms that this is indeed the case.
Get full access to this article
View all access options for this article.
References
1.
AtkinsonABStiglitzJE, 1980Lectures on Public Economics (McGraw-Hill, Maidenhead, Berks)
2.
BennettRJ, 1980The Geography of Public Finance. Welfare under Fiscal Federalism and Local Government Finance (Methuen, Andover, Hants)
