The Politics of Intergovernmental Transfers in Northeast Thailand

Public finance theory dictates that intergovernmental transfers should help alleviate horizontal fiscal imbalances among local jurisdictions. The amount of intergovernmental fiscal transfers should be inversely related to each local jurisdiction's revenue-generating capacity. However, intense politicking in many countries turns an intergovernmental fiscal transfer system into a battle of local and particularistic interests. This article illustrates a disjuncture between the theory and practice of intergovernmental equalization transfers with the quantitative and qualitative evidence from 226 local administrative organizations in Khon Kaen province in northeastern Thailand. Findings indicate that Thailand's current intergovernmental fiscal transfer system is not oriented toward achieving local horizontal equity. In Khon Kaen, local administrative organizations with high fiscal capacity tend to receive more equalization grants than financially disadvantaged jurisdictions. In-depth interviews with selected local govern-ment officials in Khon Kaen reveal inconsistency and heavy politicization of the country's intergovernmental fiscal transfer system.