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Fiscal equalization schemes and subcentral government borrowing

In: Central and Local Government Relations in Asia

Author

Listed:
  • Salvador Barrios
  • Diego Martínez-López

Abstract

Examining the cases of Canada, Germany, and Spain, the role played by fiscal equalization schemes in determining subnational borrowing was analyzed, and the link between regional governments’ primary fiscal balances and gross domestic product per capita was tested econometrically. The study results show that either poor or rich regions can display higher regional public borrowing on average, and these results can be linked to the institutional design of regional equalization systems in place. Particular elements, such as tax efforts and fiscal capacities, also play relevant roles in this regard. Reforms of these schemes can therefore prove instrumental in reducing regional heterogeneity in public borrowing.

Suggested Citation

  • Salvador Barrios & Diego Martínez-López, 2017. "Fiscal equalization schemes and subcentral government borrowing," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 4, pages 130-160, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17640_4
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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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