The Role of Fiscal Transfers in Smoothing Regional Shocks : Evidence from Existing Federations

We assess the extent to which fiscal transfers smooth regional shocks in three large federations:the U.S., Canada, and Australia. We find that fiscal transfers offset 4-11 percent of idiosyncratic shocks (risk-sharing) and 13-24 percent of permanent shocks (redistribution). This fiscal insurance largely operates through automatic stabilizers embedded in a central budget primarily through federal taxes and transfers to individuals, rather than transfers from the central government to state budgets. These results have implications for the design of fiscal risk-sharing mechanisms in the euro area

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Year of publication:	2016
Authors:	Poghosyan, Tigran
Other Persons:	Senhadji-Semlali, Abdel (contributor) ; Cottarelli, Carlo (contributor)
Publisher:	[2016]: [S.l.] : SSRN
Subject:	Schock \| Shock \| Finanzausgleich \| Intergovernmental transfers \| Föderalismus \| Federalism \| Kanada \| Canada \| Regionale Konjunktur \| Regional business cycle \| Australien \| Australia

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