By Touria Jaaidane, Professor of Economics at the University of Lille and Sophie Larribeau, Professor of Economics at the University of Rennes.

Reducing inequalities between French municipalities relies on the existence of financial equalization schemes, which involve the transfer of budgetary resources, either from the State to local authorities (known as vertical equalization), or between local authorities at the same level (horizontal equalization). The DGF is the main vertical transfer used by the State for this purpose. Examination of the way it is allocated reveals a complexity that borders on a lack of transparency for local authorities. Furthermore, an analysis of the effectiveness of financial equalization shows that while inequalities have been reduced (between 2018 and 2023), there is still room for improvement.

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