ABSTRACT
This chapter explores a main area of possible non-transparent/obfuscating practices in intergovernmental relations; namely, intergovernmental transfers. It considers the allocation of a general-purpose transfer, whose main aim is to fill vertical and horizontal imbalances in subnational government finances. For simplicity, the way this transfer is financed is left entirely out. That is, taxes, or opportunity costs are not introduced in the analysis. Horizontal, non-obfuscated competition will put a brake on misuse of funds and corruption in every jurisdiction. But surely a personnel-based transfer is not allocated in a way that ensures its most efficient use from an inter-jurisdictional/ global point of view. Obviously, from an analytical point of view one could not disentangle efficiency from equity issues. This applies also to transfers. However, frequently in the real world issues concerning the regional equity aspects of the allocation of transfers dominate efficiency concerns and may require a separate consideration.
