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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 11: The Determinants of Regional Transport Investment Across Europe

Achim Kemmerling and Andreas Stephan

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


Achim Kemmerling and Andreas Stephan 1 INTRODUCTION In recent years a fruitful dialogue across disciplines has spurred academic scholarship on regional redistribution and fiscal federalism. In particular, older predominantly normative claims about the regional allocation of transfers and public investments have been questioned both in economics and political science by positive accounts of the political process that leads to this allocation. Among others, the works of Inman (1988), Dixit and Londegran (1998) or Persson and Tabellini (2002) have developed theoretical models to show how political institutions and the distribution of voter preferences affect the regional redistribution across different tiers of the government. Empirical contributions have shown the relevance of such factors in various fields of public policy and in very different political systems (for example, Levitt and Snyder 1995; Kemmerling and Stephan 2002; Kemmerling and Bodenstein 2006). A key factor in this literature is the relevance of country-specific political institutions. However, the causal influence of these institutions is only visible in cross-country comparisons given that political institutions do not vary much over time. The need for comparative studies is hence an important lacuna for empirical research. In this chapter we contribute to the understanding of the role of political institutions by comparing the determinants of regional redistribution across countries. We focus our analysis on the determinants of regional road infrastructure investments in four major European countries: France, Germany, Italy and Spain. All four countries have similar levels of GDP per capita but have very different political systems. Germany and Spain...

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