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Fiscal Decentralization and Economic Growth in Spain

Author

Listed:
  • Josep Lluís Carrion-i-Silvestre

    (University of Barcelona, Spain)

  • Marta Espasa

    (University of Barcelona, Spain)

  • Toni Mora

    (Universitat Internacional de Catalunya, Barcelona, Spain)

Abstract

This article analyzes the contribution of the Spanish fiscal decentralization process to economic growth at both the aggregate and regional levels. Our main conclusion is that at the aggregate level, the process of decentralization of responsibilities to autonomous communities (ACs) has not had significant effects on Spanish economic growth when fiscal decentralization is measured in terms of revenue and investment shares, while a statistically significant negative effect is found when decentralization is measured through expenditure shares. When the study is carried out from a regional point of view, we find that fiscal decentralization at the AC level has a positive effect on economic growth for those ACs with the highest levels of fiscal and institutional decentralization, but the opposite effect is found for those ACs with the lowest levels of competencies. Decentralization at the local level has a significant positive effect for ACs with complete fiscal autonomy.

Suggested Citation

  • Josep Lluís Carrion-i-Silvestre & Marta Espasa & Toni Mora, 2008. "Fiscal Decentralization and Economic Growth in Spain," Public Finance Review, , vol. 36(2), pages 194-218, March.
  • Handle: RePEc:sae:pubfin:v:36:y:2008:i:2:p:194-218
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    Citations

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    Cited by:

    1. Carlos Usabiaga & E. Macarena Hernández-Salmerón, 2016. "Regional Growth and Convergence in Spain: Is the Decentralization Model Important?," EcoMod2016 9358, EcoMod.
    2. Díaz Serrano, Lluís & Meix Llop, Enric, 2012. "Do Fiscal and Political Decentralization Raise Students’ Performance? A Cross-Country Analysis," Working Papers 2072/203156, Universitat Rovira i Virgili, Department of Economics.
    3. Juan González Alegre, 2010. "Fiscal decentralization and intergovernmental grants: the European regional policy and Spanish autonomous regions," Working Papers 2010/6, Institut d'Economia de Barcelona (IEB).
    4. Matthew Higgins & Andrew Young & Daniel Levy, 2009. "Federal, state, and local governments: evaluating their separate roles in US growth," Public Choice, Springer, vol. 139(3), pages 493-507, June.
    5. Juan González-Alegre, 2015. "Does fiscal decentralization affect the effectiveness of intergovernmental grants? European regional policy and Spanish autonomous regions," Papers in Regional Science, Wiley Blackwell, vol. 94(4), pages 817-847, November.
    6. Paul Hallwood & Ronald MacDonald, 2008. "A Review of the Empirical Evidence on the Effects of Fiscal Decentralization on Economic Efficiency: With Comments on Tax Devolution to Scotland," Working papers 2008-46, University of Connecticut, Department of Economics.
    7. Javier Vázquez-Grenno & Jordi Jofre-Monseny & José I. Silva, 2016. "Local labor market effects of public employment," Working Papers 2016/11, Institut d'Economia de Barcelona (IEB).
    8. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
    9. Nasir Iqbal & Musleh Ud Din & Ejaz Ghani, 2012. "Fiscal Decentralisation and Economic Growth: Role of Democratic Institutions," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(3), pages 173-195.
    10. Duc Vo, 2008. "The Economics of Measuring Fiscal Decentralisation Part 4: Fiscal Decentralisation in Vietnam, China, and Selected Asean Nations," Economics Discussion / Working Papers 08-16, The University of Western Australia, Department of Economics.
    11. Diaz-Serrano, Luis & Meix-Llop, Enric, 2012. "Do Fiscal and Political Decentralization Raise Students' Performance? A Cross-Country Analysis," IZA Discussion Papers 6722, Institute for the Study of Labor (IZA).
    12. Philip Bodman & Kelly-Ana Heaton & Andrew Hodge, "undated". "Fiscal Decentralisation and Economic Growth: A Bayesian Model Averaging Approach," MRG Discussion Paper Series 3509, School of Economics, University of Queensland, Australia.
    13. Paul Hallwood, 2010. "Reforming Taxation in the Scotland Act (1998): Hard Budget Constraints and the Inadequacy of the Calman Commission Proposals," Working papers 2010-19, University of Connecticut, Department of Economics.
    14. Patricio Perez & David Cantarero, 2010. "Decentralization and Regional Government Size: an Application to the Spanish Case," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1032, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    15. ESTEBAN, Sonia & DE FRUTOS, Pablo & PRIETO; Maria Jose, 2008. "Fiscal Decentralization And Economic Growth. Empiric Evidence From A Regional Perspective," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 8(1), pages 29-58.

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