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The Spanish system of regional financing: a critical analysis and some reform proposals


  • de la Fuente , Ángel

    () (Instituto de Análisis Económico, CSIC)

  • Gundín, María

    (Universidad Pompeu Fabra)


We identify a number of elements of the current Spanish system of regional financing that do not conform satisfactorily to the principles of equity, autonomy and efficiency that should inspire its design. Our main conclusion is that although the system presents a series of shortcomings that would require an in-depth reform, its basic focus on the equalization of the service provision capacity of all regional governments should be preserved because it is in accordance with the constitutional guarantee of equal rights for all citizens and with notions of horizontal equity that are widely shared in our country. In fact, the main shortcoming of the system is, in our opinion, that it does not fully guarantee such equality in practice. Additional weaknesses of the system are its lack of transparency, the absence of mechanisms to maintain vertical equilibrium across the different levels of the administration and a significant deficit of fiscal autonomy and responsibility on the part of regional governments. Starting from this diagnostic, we provide a series of recommendations for reform that attempt to correct the system’s shortcomings.

Suggested Citation

  • de la Fuente , Ángel & Gundín, María, 2008. "The Spanish system of regional financing: a critical analysis and some reform proposals," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 13, pages 213-262.
  • Handle: RePEc:ris:invreg:0114

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    References listed on IDEAS

    1. Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
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    5. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-640, June.
    6. Daniel McFadden, 1976. "A Comment on Discriminant Analysis "Versus" Logit Analysis," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 511-523 National Bureau of Economic Research, Inc.
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    More about this item


    Regional financing;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism


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