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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 14: The Costs and Benefits of Staying Together: The Catalan Case in Spain

Elisenda Paluzie

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


Elisenda Paluzie 1 INTRODUCTION Spain is a plurinational country but Spanish identity has been built around Castilian language and culture. Three other historical nations with their own language (Basque Country, Catalonia or the Catalan countries, and Galicia) subsist in modern Spain. Since the process of transition to democracy in the late 1970s, the country has been organised as a decentralised state. It is not a federal country, but there is an important degree of political decentralisation. The country is composed of 17 autonomous communities, each one with its own parliament and some degree of legislative power. The fiscal decentralisation model is asymmetric: there are two systems, the Common and the ‘foral’ regime, with the latter being established only for the Basque Country and Navarre.1 In this case study, I will focus on the Catalan case for three reasons. First, because in Catalonia, nationalism has the majority in the regional elections, while this is not the case in Galicia. Second, because net fiscal flows are an important issue in the public debate, while this is not the case in the Basque Country.2 And, finally, because as opposed to the Basque Country, the absence of violence in the Catalan political conflict eases the analysis, and allows us to focus on the economic issues at stake. 2 THE POLITICAL ECONOMY OF NATIONAL BORDERS In the late 1990s and early 2000s, a line of research in political disintegration was developed in the context of the New Political Economy by Alberto Alesina and Enrico Spolaore.3...

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