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This paper examines the extent to which Thailand's current general or equalization grant program has helped reduce local fiscal disparity. Theoretically, the general grant transfers ought to be inversely related to local revenue-generating capacity. However, based on the 2010-2012 local government financial data from Khon Kaen province, this paper finds that local jurisdictions with high fiscal capacity and income per capita tend to receive more equalization grant per capita than the fiscally and economically disadvantaged localities. Descriptive statistics, the Gini coefficients, and fixed-effects econometric model are used to examine the relationship between general grant transfers and local fiscal capacity. (Asian Aff/GIGA)

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 government officials in Khon Kaen reveal inconsistency and heavy politicization of the country's intergovernmental fiscal transfer system.