Table of Contents

The Political Economy of Inter-Regional Fiscal Flows

The Political Economy of Inter-Regional Fiscal Flows

Measurement, Determinants and Effects on Country Stability

Studies in Fiscal Federalism and State–local Finance series

Edited by Núria Bosch, Marta Espasa and Albert Solé Ollé

Struggles over what a region receives, or should receive, from the budget of the central government are common to many countries. Discussions often focus on the measures of ‘net fiscal flows’ or ‘fiscal balances’ provided by the government or other actors. This unique book shows just how these flows are computed then interpreted and clarifies the often misunderstood economic and political motives that explain why some regions receive more monies than others.

Chapter 7: Inter-regional Fiscal Flows: Methodologies, Results and their Determinant Factors for Spain

Marta Espasa and Núria Bosch

Subjects: economics and finance, public finance, politics and public policy, public policy

Extract

Marta Espasa and Núria Bosch INTRODUCTION 1 In Spain there is a great tradition of studies on fiscal flows; in fact, about 40 studies can be accounted during the last 50 years (Barberán, 2006). However, it was in Catalonia where they had their origin, Trias Fargas (1960), and where these sort of studies have had a greater proliferation because this is a territory which has historically presented an important fiscal deficit. Moreover, this fact was linked to a strong national identity in this autonomous community (language, institutions and own history) which causes the reduction of such deficit to be a permanent topic within the claims of the main Catalan political parties and it also raises debate among Catalan society, which brought this topic into the central government’s political agenda. Each time a study on fiscal flows is presented, debate and controversy are guaranteed at political, media and civil society levels. In this context, and requested by the Catalan nationalist parties, in 2004 the Spanish Parliament approved a draft in order that the central government could elaborate a methodology for computing fiscal flows which would allow the determination of the annual financial flows between the autonomous communities and the central administration. An expert commission, appointed by the government, was in charge of elaborating such methodology which was presented to the Senate in September 2006 Informe del Instituto de Estudios Fiscales [Report from the Institute of Fiscal Studies]. Lately, following this methodology, the central government computed the fiscal flows between...

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