Evaluation of the Equalising Performance of Central Government Financial Assistance to the Communes

Abstract

The 36,600 French communes are far from able to offer their residents and businesses the same level of local public services for a given tax burden. Tax wealth is concentrated in a small number of communes while the costs of providing services differ considerably from one commune to the next. The purpose of the regional equalisation policy is to smooth out these disparities. It concerns an annual sum of approximately ¬20 billion in transfers. The 2003 constitutional reform, which set a target for the system to move towards greater equality, steps up the need for an evaluation of equalisation today. A preliminary overall and commune-by-commune evaluation is presented here. The overall analysis shows that the equalisation mechanisms are relatively effective and that this effectiveness increases over time. They reduced purchasing power inequalities by some 40% in 2001 as opposed to 34% in 1994.Equalisation, Fiscal Federalism, Inequalities, Public Finance