Marta Espasa

Fiscal Decentralization and Economic Growth in Spain

This article analyzes the contribution of the Spanish fiscal decentralization process to economic growth at both the aggregate and regional levels. Our main conclusion is that at the aggregate level, the process of decentralization of responsibilities to autonomous communities (ACs) has not had significant effects on Spanish economic growth when fiscal decentralization is measured in terms of revenue and investment shares, while a statistically significant negative effect is found when decentralization is measured through expenditure shares. When the study is carried out from a regional point of view, we find that fiscal decentralization at the AC level has a positive effect on economic growth for those ACs with the highest levels of fiscal and institutional decentralization, but the opposite effect is found for those ACs with the lowest levels of competencies. Decentralization at the local level has a significant positive effect for ACs with complete fiscal autonomy.

Citizen control and the efficiency of local public services

It is generally accepted that fiscal decentralization increases citizen control over politicians, fostering accountability and increasing efficiency. We identify the socioeconomic characteristics of citizens that increase their control over local policy makers and thus generate greater efficiency in a decentralized context. We also highlight the fiscal characteristics that influence this control and efficiency. The study examines a sample of Spanish municipalities, applying a methodology based on the conventional procedure of two-stage estimation. The results provide a certain amount of empirical evidence that suggests that the strong presence of retailers and retired people favours citizen control, which fosters accountability and efficiency. A factor that facilitates this control, and therefore greater efficiency, is the presence of low opportunity costs for obtaining information regarding local public service management. We also demonstrate that a high level of taxation does not lead to greater control by citizens and that transfers generate the ‘flypaper effect’.

The Political Economy of Inter-Regional Fiscal Flows

Contents: Preface 1. Inter-regional Fiscal Flows: Introduction to the Issues, Nuria Bosch, Marta Espasa Queralt and Albert Sole Olle PART I: COUNTING MONIES: MEASUREMENT AND PRACTICE OF INTER-REGIONAL FISCAL FLOWS 2. Regional Fiscal Flows: Measurement Tools, Giuseppe C. Ruggeri 3. Regional Fiscal Flows: Determinants, Measurements and Meanings, Francois Vaillancourt Comment by Nuria Bosch and Antoni Zabalza 4. Constitutional Reforms, Fiscal Decentralization and Regional Fiscal Flows in Italy, Maria Flavia Ambrosanio, Massimo Bordignon and Floriana Cerniglia 5. Measurement and Practice of Fiscal Flows: The Case of Belgium, Paul Von Rompuy 6. Balance Sheet Federalism: Canada, Giuseppe C. Ruggeri Comment by Francois Vaillancourt 7. Balance Sheet Federalism: Methodologies, Results and their Determinant Factors for Spain, Marta Espasa Queralt and Nuria Bosch Comment by Guillem Lopez Casasnovas and Ramon Barberan PART II: BEYOND THE DATA: WHY SOME REGIONS GET MORE MONEY? 8. Federalism and Inter-regional Redistribution, Jonathan Rodden Comment by Carles Boix 9. Decentralization by Politicians: Creation of Grants-financed Local Jurisdictions, Stuti Kehmani 10. The Political Rationale of Regional Financing in Spain, Sandra Leon Comment by Santiago Lago 11. The Determinants of Regional Transport Investment Across Europe, Achim Kemmerling and Andreas Stephan 12. The Determinants of the Regional Allocation of Infrastructure Investment in Spain, Albert Sole-Olle Comment by Germa Bel PART III: IN OR OUT? REGIONAL REDISTRIBUTION AND THE STABILITY OF FEDERATIONS 13. Federalism, Regional Redistribution and Country Stability, Enrico Spolaore Comment by Massimo Bordignon 14. The Costs and Benefits of Constitutional Options for Quebec and Canada, Francois Vaillancourt 15. Staying Together? Scotland and the Rest of the United Kingdom, David Bell 16. The Costs and Benefits of Staying Together: The Catalan Case in Spain, Elisenda Paluzie Index

The Territorial Redistributive Power of the EU Budget: Empirical Evidence at National and Regional Levels

The authors purpose is to estimate the redistributive power of the European Union budget among the European countries and regions. The analysis is focused on the main items of revenue, expenditure, and net fiscal balance. First, the income elasticity of the European Union revenues, expenditures, and fiscal balance are estimated in order to examine the degree to which these instruments are progressive. Second, the impact of these instruments in the regional and national income is analysed with the objective of evaluating the capacity to reduce differences in per capita income levels.

Should Large Spanish Municipalities be Financially Compensated? Costs and Benefits of Being a Capital/Central Municipality

This paper analyse the costs and benefits of being a capital or central municipality, where central costs are understood to be incurred specifically as a result of the problems large municipalities located at the centre of an urban agglomeration face and capital costs are understood to result from the presence of regional and/or central government institutions in the municipality. However, these two qualities might also be beneficial to municipalities, resulting in a direct increase in their fiscal capacity. Here, by estimating an equation of the expenditure needs and the fiscal capacity of Spanish municipalities with more than 75,000 inhabitants, we find that the central costs incurred by large municipalities are offset by their greater fiscal capacity, but that the same is not true for municipalities that serve as political/administrative capitals.

Catalan Grievances: Do Fiscal Flows Matter?

The purpose of this article is to examine the fiscal flows produced by the actions of the Spanish central public sector concerned with Catalonia and their main determinants. We also compare the Catalan fiscal balance with that of rich territories in other countries (Australia, Belgium, Canada, the USA, Spain and Italy). To this aim the article examines, first, whether the methodology used in Catalonia meets international standards; second, whether the Catalan fiscal deficit is indeed among the largest in a sample of territories analysed; third, which are its main determinants. The methodology for calculating fiscal balances is found to be fairly standardised internationally, revealing that Catalonia has a structural fiscal deficit of between 6 and 8 percent of GDP, according to whether the benefit or the flow approach is applied. These figures are a consequence, to a large extent, of the Spanish system of financing the Autonomous Communities. Finally, we briefly discuss whether the fiscal flows can justify, at least partially, the current secessionist process of Catalonia.

Is Decentralization Really Welfare Enhancing? Empirical Evidence from Survey Data (1994-2011)

Summary Decentralization is believed to constitute the optimal institutional arrangement for the provision of public expenditure. In contrast to centralization, it is thought to offer a better match between the provision of public services and individual preferences. We test this fundamental hypothesis propounded by the fiscal federalism literature by analyzing the process of decentralization undergone by Spain since the beginning of the 1980s. We exploit survey data in which respondents (coded according to their region of residence) are asked about their level of satisfaction with the provision of public goods. A higher degree of satisfaction is expressed when responsibility for education and health expenditure is assigned to the intermediate tier of government rather than to central government. This level of satisfaction, however, is not recorded in the case of Spains largest regions. Likewise, the simultaneous presence of tax revenue decentralization does not guarantee further welfare gains. In the case of the administration of justice—where the nature of the responsibility assigned to some regional governments is of a merely administrative nature—decentralization does not appear to have any impact on the level of satisfaction expressed.