Discussant Comments

The three papers by Bahl and Wallace, Shah and Spahn have a clear complementarity. Bahl and Wallace deal with vertical sharing arrangements. They show and analyze how countries decide the division of their total national fiscal resources between different tiers of government, present some recent trends, and provide convincing explanations for them. Shah’s paper is one of the first contributions to the literature concerning the political institutions responsible for the decision-making process and the implementation of a main component of vertical sharing, namely equalization grants. Spahn’s paper is more composite. Its first part provides an illustration of the various transfer instruments available, and of the implementation of a main component of vertical sharing, namely equalization grants. Spahn’s paper is more composite. Its first part provides an illustration of the various transfer instruments available, and of the objectives they serve. The second part illustrates, with a simple numerical example, a widely used model of equalization grants that is based both on expenditure needs and fiscal capacity.