Grant allocation formulas used to allocate fiscal resources among different tiers of government have proved to be useful in many countries around the world. This article provides a unit cost approach equalization formula that was used in... more
Grant allocation formulas used to allocate fiscal resources among different tiers of government have proved to be useful in many countries around the world. This article provides a unit cost approach equalization formula that was used in the Federal Democratic Republic of Ethiopia (FDRE) to transfer resources from the regions to the woredas (districts) in 2007. Study methodology: The study approach involved gathering and reviewing of pioneering literature; identifying six representative sectors; field visits to collect and collate data; and data analysis. Conclusion: “TThe current article explored theoretical and empirical literature to design a unit cost methodology to establish an intergovernmental fiscal transfer formula for the FDRE. In achieving this objective, the study adopted three pragmatic approaches to research.