IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Fiscal equalisation schemes and sub-central government borrowing

Listed author(s):
  • Salvador Barrios
  • Diego Martínez

We analyse the role played by fiscal equalisation schemes in determining sub-national borrowing. We test econometrically the link between the regional government primary fiscal balances and the GDP per capita in Canada, Germany and Spain. We find that either poor or rich regions can display higher regional public borrowing on average and explain how these results can be linked to the institutional design of regional equalisation systems in place in these countries. Particularly, elements such as tax effort and fiscal capacities play a relevant role in this regard. Reforms of these schemes can therefore prove instrumental in reducing regional heterogeneity in public borrowing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://infogen.webs.uvigo.es/WP/WP1401.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Universidade de Vigo, GEN - Governance and Economics research Network in its series Working Papers. Collection A: Public economics, governance and decentralization with number 1401.

as
in new window

Length: 41 pages
Date of creation: Apr 2014
Handle: RePEc:gov:wpaper:1401
Contact details of provider: Postal:
Campus Universitario As Lagoas s/n , 32004 Ourense

Phone: (+34) 988 368 725
Web page: http://infogen.webs.uvigo.es
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Timothy Goodspeed, 2002. "Bailouts in a Federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 409-421, August.
  2. Douglas Sutherland & Robert Price & Isabelle Joumard, 2006. "Sub-central government fiscal rules," OECD Economic Studies, OECD Publishing, vol. 2005(2), pages 141-181.
  3. Robin Boadway & Anwar Shah, 2007. "Intergovernmental Fiscal Transfers : Principles and Practice," World Bank Publications, The World Bank, number 7171, September.
  4. Bob Searle & Ehtisham Ahmad, 2005. "On the Implementation of Transfers to Subnational Governments," IMF Working Papers 05/130, International Monetary Fund.
  5. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 395-422, August.
  6. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 949-963.
  7. Oya Celasun & Joong S Kang, 2006. "On the Properties of Various Estimators for Fiscal Reaction Functions," IMF Working Papers 06/182, International Monetary Fund.
  8. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-633, November.
  9. Schuknecht, Ludger & von Hagen, Jürgen & Wolswijk, Guido, 2009. "Government risk premiums in the bond market: EMU and Canada," European Journal of Political Economy, Elsevier, vol. 25(3), pages 371-384, September.
  10. Jürgen Von Hagen & Massimo Bordignon & Bhajan S. Grewal & Per Peterson & Helmut Seitz & Matz Dahlberg, 2000. "Subnational Government Bailouts in OECD Countries: Four Case Studies," Research Department Publications 3100, Inter-American Development Bank, Research Department.
  11. Barrios, Salvador & Strobl, Eric, 2009. "The dynamics of regional inequalities," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 575-591, September.
  12. Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
  13. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  14. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  15. Dan Stegarescu, 2005. "Public sector decentralisation: measurement concepts and recent international trends," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 301-333, September.
  16. Yvan Guillemette, 2010. "Fiscal-Consolidation Strategies for Canadian Governments," OECD Economics Department Working Papers 818, OECD Publishing.
  17. Baskaran, Thushyanthan, 2012. "Soft budget constraints and strategic interactions in subnational borrowing: Evidence from the German States, 1975–2005," Journal of Urban Economics, Elsevier, vol. 71(1), pages 114-127.
  18. Buettner, Thiess & Wildasin, David E., 2006. "The dynamics of municipal fiscal adjustment," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1115-1132, August.
  19. von Hagen, Jurgen & Eichengreen, Barry, 1996. "Federalism, Fiscal Restraints, and European Monetary Union," American Economic Review, American Economic Association, vol. 86(2), pages 134-138, May.
  20. Luis Ángel Hierro Recio & Pedro Atienza Montero & David Patiño Rodríguez, 2010. "El Efecto Redistributivo De Las Transferencias En La Financiación Regional," Revista de Economia Aplicada, Universidad de Zaragoza, Departamento de Estructura Economica y Economia Publica, vol. 18(2), pages 99-129, Autumn.
  21. Strumpf, Koleman S., 1998. "A predictive index for the flypaper effect," Journal of Public Economics, Elsevier, vol. 69(3), pages 389-412, September.
  22. Egger, Peter & Koethenbuerger, Marko & Smart, Michael, 2010. "Do fiscal transfers alleviate business tax competition? Evidence from Germany," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 235-246, April.
  23. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
  24. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  25. Antonio Fatás & Ilian Mihov, 2003. "The Case for Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1419-1447.
  26. Hansjörg Blöchliger & David King, 2006. "Fiscal Autonomy of Sub-Central Governments," OECD Working Papers on Fiscal Federalism 2, OECD Publishing.
  27. Hansjörg Blöchliger & Monica Brezzi & Claire Charbit & Mauro Migotto & José Maria Pinero Campos & Camila Vammalle, 2010. "Fiscal Policy Across Levels of Government in Times of Crisis," OECD Working Papers on Fiscal Federalism 12, OECD Publishing.
  28. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
  29. Salvador Barrios & Pietro Rizza, 2010. "Unexpected changes in tax revenues and the stabilisation function of fiscal policy. Evidence for EU," European Economy - Economic Papers 2008 - 2015 404, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  30. Santiago Lago-Peñas, 2005. "Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case," Environment and Planning C, , vol. 23(3), pages 437-453, June.
  31. Pablo Simon-Cosano & Santiago Lago-Peñas & Alberto Vaquero, 2014. "On the Political Determinants of Intergovernmental Grants in Decentralized Countries: The Case of Spain," Publius: The Journal of Federalism, Oxford University Press, vol. 44(1), pages 135-156, January.
  32. Niklas Potrafke & Markus Reischmann, 2012. "Fiscal Equalization Schemes and Fiscal Sustainability," CESifo Working Paper Series 3948, CESifo Group Munich.
  33. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(6), pages 631-649, November.
  34. Kirsten H. Heppke-Falk & Guntram B. Wolff, 2008. "Moral Hazard and Bail-Out in Fiscal Federations: Evidence for the German Länder," Kyklos, Wiley Blackwell, vol. 61(3), pages 425-446, 08.
  35. Beate Jochimsen & Robert Nuscheler, 2011. "The political economy of the German Lander deficits: weak governments meet strong finance ministers," Applied Economics, Taylor & Francis Journals, vol. 43(19), pages 2399-2415.
  36. Isabel Argimón & Pablo Hernández de Cos, 2012. "Fiscal Rules and Federalism as Determinants of Budget Performance," Public Finance Review, , vol. 40(1), pages 30-65, January.
  37. Eyraud, Luc & Lusinyan, Lusine, 2013. "Vertical fiscal imbalances and fiscal performance in advanced economies," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 571-587.
  38. Velasco, Andres, 2000. "Debts and deficits with fragmented fiscal policymaking," Journal of Public Economics, Elsevier, vol. 76(1), pages 105-125, April.
  39. Robin Boadway & Michael Keen, 1996. "Efficiency and the optimal direction of federal-state transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 137-155, May.
  40. Foremny, Dirk & von Hagen, Jürgen, 2012. "Fiscal Federalism in Times of Crisis," CEPR Discussion Papers 9154, C.E.P.R. Discussion Papers.
  41. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
  42. Jonathan A. Rodden & Gunnar S. Eskeland (ed.), 2003. "Fiscal Decentralization and the Challenge of Hard Budget Constraints," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182297, July.
  43. Canuto, Otaviano & Liu, Lili, 2010. "Subnational Debt Finance and the Global Financial Crisis," World Bank - Economic Premise, The World Bank, issue 13, pages 1-7, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:gov:wpaper:1401. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricio Sanchez-Fernandez)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.