A dynamic equalisation model for economic and social capital grants with a South African example

Abstract

A capital grant model has been developed which can be used in developing economies to allocate grants to sub-national governments for economic or social capital. The model allows these allocations to happen in a way that increases the value of the capital stockwhilst at the same time addresses any inter regional inequities, or economic inefficiencies. The model is also applied to South Africa as an illustrative example and the results of three model simulations for that country are presented. There is a discussion of the data requirements for the model and how it might be replicated by researchers for other economies.