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Grants systems in OECD countries: trends and some policy issues

Grants systems in OECD countries: trends and some policy issues. Experts meeting on “General Grants Vs. Earmarked Grants: Theory and practice” Thursday September 17 th , 2009 Camila Vammalle , Hansjörg Bloechliger OECD. Share of transfers in total government expenditure (2005).

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Grants systems in OECD countries: trends and some policy issues

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  1. Grants systems in OECD countries: trends and some policy issues Experts meeting on “General Grants Vs. Earmarked Grants: Theory and practice” Thursday September 17th, 2009 Camila Vammalle, HansjörgBloechliger OECD

  2. Share of transfers in total government expenditure (2005) Source: National Accounts

  3. Change in the share of transfers in government expenditure (1995-2005) Source: National Accounts

  4. Change in SCG expenditure to total government expenditure ratio (1995-2005) Source: National Accounts

  5. Change in SCG tax revenues on total government tax revenues (1995-2005) Source: National Accounts

  6. Composition of Grants (2006) Note: the first line corresponds to state averages, the second line to local averages. Source: OECD Fiscal Decentralisation Database

  7. Change in the composition of grants (2000-2006) Note: the first line corresponds to state averages, the second line to local averages. Source: OECD Fiscal Decentralisation Database

  8. Some policy issues (1/4) • Grants have an equalisation role Equalisation grants represent: • 2.3% of GDP • 4.8% of total government expenditure • 55% of total intergovernmental grants

  9. Some policy issues (2/4) • Grants may reduce externalities • Spending or tax • Horizontal or vertical • Matching grants • Are these externalities overestimated?

  10. Some policy issues (3/4) • Earmarked grants may be used to fund specific policies • Such as: risk sharing, experimentation, co-funding, addressing exceptional situations e.g.: Share of grants to SCGs in national stimulus packages:

  11. Some policy issues (4/4) • But grants may have unintended side effects • Reducing SCG tax effort • Putting pressure on spending, deficits and debts • Thus need a skilful grant design and combining grants with complementary instruments

  12. Thank you!

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