Fiscal federalism

Fiscal federalism means that when a country is made up of different smaller areas like states or provinces, the money and power are shared between them. So, imagine you have a big cake that is divided into many smaller pieces. Each piece represents a smaller area of the country.

Now, sometimes some pieces of the cake are bigger than others. This means that some areas have more money and resources than others. In fiscal federalism, the government tries to make sure that each piece of the cake gets its fair share of money and resources so that they can provide the same services and have the same opportunities as other areas.

For example, let's say one state has a lot of factories that make a lot of money. That state will have more money than another state that doesn't have as many factories. In fiscal federalism, the government would try to make sure that the state with more money shares its resources with the state that has less money so they can both benefit from the factories.

Fiscal federalism is important because it helps to create a fair and equal society where every area of the country gets the help it needs. It also means that people who live in different states or provinces have similar services, like healthcare and education, regardless of where they live.