FEDERAL GRANTS TO STATE GOVERNMENTS IN WEST MALAYSIA : A SPACE-TIME ANALYSIS

Abstract

The Federation of Malaysia is ruled by a centralized Federal Government. Each state also has a State Government, which is subordinate to the Federal Government. The revenue collected by the State Governments is not enough to cover state expenditure. To help the State Governments balance their sub-odinates, the Federal Government allocates grants to each state. It has been claimed that the system of grant allocation fails to equalize interstate fiscal imbalance, as that allocation system favours the rich states. In this academic exercise, a space-time analysis is performed to verify this claim, utilizing state financial data for the period 1970-81. The implications of interstate fiscal differences are also examined