Journal article

State government expenditures in a federal system: Cost and revenue equalization effects in Australia

R Williams

Applied Economics | Published : 1995


All federal systems entail some degree of fiscal equalization. Australia has the most comprehensive system in the world, its unique feature being cost equalization. The effects of this on state government behaviour are not clear. The procedures used in Australia for cost and revenue equalization are employed to develop a model of state government expenditures. The model aims to explain both total expenditure and its allocation across types of government services. The empirical results suggest that without revenue equalization state taxes would adjust to maintain current state expenditures. Some cost equalization effects are also found. © 1995, Taylor & Francis Group, LLC. All rights reserved..

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