However, decentralization might lead to horizontal fiscal imbalances between decentralized districts because of the different fiscal capacities and expenditure needs of these districts. It might also lead to vertical imbalances in favor of the central government because of the same reason. In many countries an intergovernmental transfer system exists to overcome these imbalances (Martinez-Vazquez and Searle 2007).33.2. The Model Some authors question the effectiveness of such equalization transfers. On the one hand, equalization transfers could give disadvantaged districts the scope they need for investments in public infrastructure and services. On the other hand, it is not clear whether they use these transfers effectively (Feld and Dede 2005). It is also possible that instead of investing in public services, these transfers are used for consumption and rent-seeking activities.