The Political Economy of Inter-Regional Fiscal Flows
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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.
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Comment II

Antoni Zabalza

Extract

Comment II Antoni Zabalza In their respective chapters, Ruggeri and Vaillancourt offer us a real tour de force on the subject of regional fiscal balances. There is complementarity between the two chapters and many insightful ideas. In this comment I concentrate on only one of the aspects they consider: the treatment of national surpluses and deficits in the measurement of regional fiscal balances. The need for an adjustment of regional fiscal balances when the national budget shows a surplus or a deficit is recognized by both authors. Vaillancourt points out that there are two possible corrections, on either the revenue or expenditure side, but gives no indication of preference between the two. Ruggeri, on the other hand, proposes only one procedure, depending on whether there is a surplus or a deficit in the national budget. In particular, if one thinks that a surplus is caused by unplanned excess revenue, then the recommendation would be to correct the revenue side; whereas if the cause of a deficit is deliberate excess expenditure, the correction should be on the expenditure side. To leave the question open, as Vaillancourt does, may be unsatisfactory. But Ruggeri’s proposal also has difficulties. It is based on a degree of knowledge about the causes of national budget imbalances that we do not usually have; and it considers particular causes of surpluses and deficits which do not exhaust all the existing possibilities: a surplus may be deliberate if the federal government tries to reduce debt, and a deficit may...

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