Modeling fiscal federalism: A decomposition analysis of changes in intra-European Union budgetary transfers

George Deltas, Gregor Van Der Beek

Research output: Contribution to journalArticlepeer-review

Abstract

We use a stylized model of inter-governmental transfers to investigate the extent to which the post-Maastricht increase in the European Union budget, and the associated increase in net transfers among the member states, has been driven by the political deepening of the European Union. We find that only two-thirds of the increase in net transfers is attributable to the increased cohesion of the Union. The remainder is due to the entry of Austria, Finland, and Sweden and changes in the relative population of member states. We also find that the convergence in member states' per capita incomes, measured in inflation-adjusted local currency, has been almost entirely offset by the devaluation of the currencies of poorer member states. Therefore, relative income considerations have played no role in the change of net transfers. The methodology introduced in this paper is of general applicability to a large number of federations.

Original languageEnglish (US)
Pages (from-to)592-613
Number of pages22
JournalQuarterly Review of Economics and Finance
Volume43
Issue number4
DOIs
StatePublished - Dec 2003

Keywords

  • Fiscal federalism
  • International transfers
  • Public finance

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Modeling fiscal federalism: A decomposition analysis of changes in intra-European Union budgetary transfers'. Together they form a unique fingerprint.

Cite this