Public Sector Governance and Accountability Series

Intergovernmental Fiscal Transfers by Anwar Shah and Robin Boadway

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Intergovernmental fiscal transfers are a dominant feature of subnational fiancé in most countries. They are used to ensure that revenues roughly match the expenditure needs of various levels of subnational governments. They are also used to advance national, regional, and local objectives, such as fairness and equity, and to create a common economic union. The structure of these transfers creates incentives for national, regional, and local governments that affect fiscal management, macroeconomic stability, distributional equity, allocational efficiency, and public service delivery.

This book reviews the conceptual and empirical literature to distill lessons for policy makers looking to design fiscal transfers in a manner that creates incentives for prudent fiscal management and effective service delivery. It covers new ground by providing practical guidance on designing output-based transfers that emphasize bottom-up, client-focused, and results-based government accountability and equalization transfers to ensure regional fiscal equity as well as the institutional arrangements for implementing such transfers.

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