EIRP Proceedings, Vol 15, No 1 (2020)

Abstract

Subnational government inequalities are always a challenge for the countries all over the world, in particular large ones, even are unitary states or federations. Romania has a unitary system, but decentralization process and different level of economic development of individual territorial units determine specific problems resulting in fiscal gaps, both horizontal and vertical. The paper focuses in the first part on the review of the literature regarding the measurement of the vertical and horizontal fiscal imbalances, and the second part will measure fiscal imbalances in Romania counties based on methodologies identified in the first part. Despite being a unitary country, Romania presents an increasing of horizontal fiscal imbalance and high vertical fiscal imbalances for 28 counties of 42. The paper can be considered a useful viewpoint in understanding the state of fiscal imbalances in Romania.