Subsidiarity and the Moral Justification of Intergovernmental Equalization Grants to Decentralized Governments

Abstract

An important problem with decentralized government relates to its tendency to create disparities between the various units with respect to their capability to provide public goods. In response to this problem, intergovernmental equalization grant transfers are a ubiquitous feature of many systems of decentralized government. However, since the earliest times, scholars of fiscal federalism have struggled to provide a convincing moral justification for providing intergovernmental equalization grants. We outline how the principle of subsidiarity might be employed to create a robust moral justification for providing equalization transfers. In addition, we explicate the steps required to operationalize a subsidiarity-based grant system and conclude with a consideration of some of the difficulties that might be encountered in doing so.