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 IX

Massimo Bordignon

Extract

Comment IX Massimo Bordignon This is an interesting chapter on a fascinating topic, written by one of the most learned scholars of the field. The chapter has really three parts. The first is an up-to-date survey of the economic literature on the formation and breakup of countries. The second is an attempt to cast further light on the relationship between decentralization, regional redistribution and secession, using a simple model to highlight a few ideas. The third is a critical survey of some recent empirical studies touching on the same problem. The second part is the most novel one, and it is the one where I want to focus most my comments on. WHY IS THIS AN IMPORTANT SUBJECT? But before doing so, let me briefly comment on the importance of the issue. As the author notes, there are now 193 different countries around the world; there were only 74 (or less than one half) in 1945. Tendencies toward decentralization seem to be widespread around the world, so much so that the great international organizations, such as IMF, the World Bank, OCSE, have all felt obliged to give increasing attention to the subject. In Europe, and particularly after the formation of the Common Market (1992), all large countries have undergone important decentralization processes; in some cases, as in Belgium, getting very close to a separation of the original country into its linguistic components. Ethnic conflicts and separation have become a constant in many continents. Even the relatively peaceful Europe has known...

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