Abstract
In many federations which have a hierarchical structure it is for various reasons desired that the fiscal strength of jurisdictions on the same level be partially equalized. The higher level jurisdiction often supports this equalization via grants to the jurisdictions on the lower level. It is a trouble-causing question which part of total funds should be allowed to each of them. The paper starts by discussing eight independent properties of a so-called funds function a reasonable (appropriate, fair) equalization method should have. It turns out that there is only one mechanism, respectively one class of funds functions, satisfying these requirements.
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