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
Ramon Barberán In Spain there is a strong tradition of researching on the calculation of federal fiscal balances (see Barberán, 2006). Moreover, the results of this research have a strong impact on the public. Both phenomena – tradition and impact – are explained by the current social debate on the inter-regional redistributive effects of the fiscal activity of the central government. This debate stems from the dissatisfaction felt by some regional governments and political parties with regard to the fiscal relationship between their region and central government. Consequently, the results of this type of research go beyond university level and are often used as an argument to support proposals for the reform of the regional government financing system or the regional distribution of central government investment. However, in my view, the relevance and reliability of such research is clearly exaggerated. The comparison between the results obtained from the large body of research conducted to date in Spain shows large discrepancies. These discrepancies are mainly caused by adopting different approaches and by applying different criteria in the allocation of central revenues and expenditures, even within the framework of the same approach. As stated in Barberán (2001), minor variations in the allocation criteria can cause major alterations in the federal fiscal balances. The most recent applied researches carried out in Spain (Uriel and Barberán, 2007; MEH, 2008; GTABFC, 2008) use two approaches: (1) the burden–benefit approach or benefit flow approach and (2) the cashflow approach or monetary flow approach....
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