Abstract
The Municipal Solidarity Fund (MSF) performs the role of equalizing instrument for the municipal sector. Being of a purely horizontal nature, it implies a strong pact between contributory and beneficiary municipal administrations. This paper aims to deepen the redistributive effects of the MSF and its impact on the financial sustainability of municipal budgets. The evidence shows that some types of municipalities are more disadvantaged by the MSF 2017; moreover, the simulation to 2021, when there will be the final implementation of the new equalization system, shows that in some cases the increase in the negative impact of equalization in relation to the own fiscal revenue will make difficult to sustain the contribution to the Fund by many administrations. Lastly, a solidarity threshold is proposed to make the equalization levy more sustainable.
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