Paul Van Rompuy

The impact of interest subsidies on the inter- regional allocation of capital: An econometric analysis for Belgium

Abstract Regionally differentiated interest rate subsidies are assumed to have on theoretical grounds both a generative and a redistributive impact on investment. In the conventional econometric approach, these effects are captured by the interest rate parameters that appear in regional investment functions which are usually estimated by single equation methods. This paper focusses on the redistributive impact of regional interest subsidies. The theoretical framework choosen for the analysis is that of a multiregional firm that maximizes overall profits subject to a capital cost constraint. The resulting allocation model for capital stock is similar to a system of consumer demand equations. It is estimated by a maximum likelihood method. The empirical results indicate that the redistributive effects of interest rate subsidies are significant.

Public Debt Consolidation with Multi-Tier Governments: Rules Matter

This paper investigates the relationship between fiscal decentralization and budgetary performance in a sample of 28 OECD countries over the period 1995-2008, characterized by a consolidation of their average debt ratio. Two empirical questions are addressed: first, did expenditure and revenue decentralization contribute to aggregate subnational discipline and did cooperative agreements between the central and subcentral layers of government have a positive impact on the budgetary performance of the latter? And second, did tax autonomy of regions and local governments guarantee fiscal discipline and to what extent did subnational fiscal rules contribute to this objective? The empirical analysis proceeds in two stages; the first stage concerns aggregate subnational fiscal balances, whereas disaggregated deficits at the regional and local level are investigated in the second stage.

Sub-National Fiscal Autonomy, Infrastructure Investment and Regional Disparities

This paper focusses on the relationship between subnational fiscal autonomy, transport infrastructure investment and regional disparities in 30 OECD countries over the period 1995-2011. Subnational fiscal autonomy is approximated by the revenue share of autonomous taxes. A fixed effects panel estimation reveals that SNG tax autonomy significantly contributes to regional convergence although its impact is small when compared to the effect of transport infrastructure investment. Subnational expenditure on education and economic affairs does not impact spatial disparities.

The Efficiency of Regional Subsidy Policies under a National Budgetary Restraint

In federal countries, supply oriented policies often belong to the competence of the member states whereas demand management is a matter for the federal government. In this respect, labour market policies as well as output and investment subsidies are to some extent decentralised and financed either by the federal government, by the states or by both.