Study: Support for structurally weak municipalities as part of financial equalization

The study examines institutional and economic interactions between the Austrian financial equalization system and the structural weaknesses of rural-peripheral municipalities. Small-scale population forecasts underline that urban centers in particular, and primarily their 'bacon belts', will be characterized by massive population dynamics in the coming years. At the same time, small rural peripheral areas will be affected by both shrinkage and increasing ageing.This shows that the Austrian fiscal equalization model - with a high degree of complexity, a low task orientation in international comparison and negligible fiscal equivalence - contains comprehensive equalization and redistribution elements, which can also be problematized economically with regard to the conflict of objectives between equality and efficiency, but that the Austrian model offers few correction and equalization mechanisms with regard to the specific problems of socio-demographic structural change and structural weakness of small rural-peripheral areas. In an international comparison, financial equalization models are examined with regard to the availability of model-immanent elements of structural weakness equalization. In almost all models, elements of 'fiscal equalization' can be identified, as they are also present in Austria. At the same time, however, in many countries there is also a 'financial needs equalization', which - in addition to other aspects - attempts to cover the special problems of sparsely populated small municipal areas. Finally, following the international examples, specific model options are presented and discussed in terms of their advantages and disadvantages. The model options aim to take greater account of the problems of municipalities affected by structural weaknesses and socio-demographic shifts within the framework of the existing financial equalization model.