This paper provides empirical analysis that measures the cyclical properties of intergovernmental transfers (or grants). Modelling a fiscal policy reaction function this paper tests whether the transfers systems in OECD countries are pro- or counter-cyclical, i.e. whether they offset cyclical...

From the literature on decentralization, it appears that the fiscal vertical imbalance is somehow inherent to multi-level governments. Using a stylized model we show that this leads to a reduction in the extent of redistributive fiscal policies if the maximal tolerable size of government has...