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

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 VIII

Germà Bel


Germà Bel The economic literature has given increasing attention to the analysis of the factors that explain the regional allocation of public investment in infrastructure. Initially, scholars focused on the trade-off between efficiency and equity. Soon other works extended the analysis to include the role of political factors as determinants of government investment in infrastructure. Two chapters in this volume follow this stream of the literature. In the first one, Achim Kemmerling and Andreas Stephan’s ‘The determinants of regional transport investment across Europe’, emphasize the importance of country-specific political institutions in order to explain the regional distribution of investments. To analyse this issue, the authors undertake a cross-country empirical analysis, considering France, Germany, Italy and Spain. This set of countries includes federal (Germany and Spain) as well as unitarian (France and Italy) countries, as well as a variety of electoral systems. Kemmerling and Stephan distinguish between (1) normative factors: efficiency, redistribution and equity, noting that efficiency and redistribution are usually conflicting objectives; and (2) political factors, within which they emphasize the ideological stance of political parties (assuming left-wing and regionalist/separatist parties positively related with investment in the region), partisanship (those regions where the governmental party is the same as the party in the national government receive more investment), and (3) electoral interest of the national government (higher investment in pivotal regions and in party’s strongholds). The results obtained from the empirical estimation suggest that efficiency concerns are important in all countries, and redistribution is an important objective in all countries...

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