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If you want me to stay, pay

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  • Peter Claeys

    () (Faculty of Economics, University of Barcelona)

Abstract

Devolution of political power is constantly on the political agenda in both Italy and Spain. Fiscal policy in these countries has granted specific privileges to some regions. Valle d’Aosta/Vallée d’Aoste (VdA) and País Vasco/Euskadi (PV) have an extensive say over spending decisions, and receive nearly all regional tax revenues. Although both VdA and PV are among the richest regions in each country, both are net beneficiaries of the fiscal equalisation system. This preferential treatment is the outcome of a fiscal system with limits on taxing power and debt issuance, and is meant as a compensation for the lack of autonomy. It so prevents calls for more fiscal autonomy, or even outright secession. The economic effects of this asymmetric federalism are negative. Although partial equalisation reduces excessive redistribution built in the fiscal equalisation system, more autonomy could pay off with more efficient government. Asymmetric federalism moreover creates a political impasse in the negotiation of a more efficient tax system and financing arrangement.

Suggested Citation

  • Peter Claeys, 2011. "If you want me to stay, pay," IREA Working Papers 201101, University of Barcelona, Research Institute of Applied Economics, revised Feb 2011.
  • Handle: RePEc:ira:wpaper:201101
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    File URL: http://www.ub.edu/irea/working_papers/2011/201101.pdf
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    References listed on IDEAS

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    1. Hansjörg Blöchliger & Olaf Merk & Claire Charbit & Lee Mizell, 2007. "Fiscal Equalisation in OECD Countries," OECD Working Papers on Fiscal Federalism 4, OECD Publishing.
    2. A Rodríguez-Pose, 1996. "Growth and institutional change: the influence of the Spanish regionalisation process on economic performance," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 14(1), pages 71-87, February.
    3. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    4. Teresa Garcia-Milà & Timothy J. Goodspeed & Therese J. McGuire, 2001. "Fiscal decentralization policies and sub-national government debt in evolving federations," Economics Working Papers 549, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2002.
    5. Teresa Garcia-Milà & Therese J. McGuire, 2007. "Fiscal Decentralization in Spain: An Asymmetric Transition to Democracy," Chapters,in: Fiscal Fragmentation in Decentralized Countries, chapter 7 Edward Elgar Publishing.
    6. Hansjörg Blöchliger & David King, 2007. "Less than you thought: The fiscal autonomy of sub-central governments," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 155-188.
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    Citations

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    Cited by:

    1. Michael Artis & Ernest Miguélez & Rosina Moreno, 2009. "Assessing Agglomeration Economies in a Spatial Framework with Endogenous Regressors," SERC Discussion Papers 0023, Spatial Economics Research Centre, LSE.
    2. Peter Claeys & Luis Costa, 2012. "“A Note on the Relationship Between the Cyclicality of Markups and Fiscal Policy”," AQR Working Papers 201208, University of Barcelona, Regional Quantitative Analysis Group, revised Sep 2012.
    3. María Lorena Marí Del Cristo & Marta Gómez-Puig, 2013. "Pass-through in dollarized countries: should Ecuador abandon the US dollar?," Applied Economics, Taylor & Francis Journals, vol. 45(31), pages 4395-4411, November.
    4. Erika Badillo & Rosina Moreno, 2012. "“What Drives the Choice of Partners in R&D Cooperation? Heterogeneity across Sectors”," AQR Working Papers 201206, University of Barcelona, Regional Quantitative Analysis Group, revised Jul 2012.
    5. Esther Goya & Esther Vayá & Jordi Suriñach, 2012. "“Do intra- and inter-industry spillovers matter? CDM model estimates for Spain”," AQR Working Papers 201207, University of Barcelona, Regional Quantitative Analysis Group, revised Sep 2012.
    6. Javier Campos & Juan Luis Jiménez & Ancor Suárez-Alemán, 2012. "“Not always sunny in paradise: prices and brand diversity in touristic areas supermarkets”," IREA Working Papers 201211, University of Barcelona, Research Institute of Applied Economics, revised May 2012.
    7. Juan Luis Jiménez & Jordi Perdiguero & Ancor Suárez, 2011. "Debating as a classroom tool for adapting learning outcomes to the European higher education area," IREA Working Papers 201109, University of Barcelona, Research Institute of Applied Economics, revised Jun 2011.
    8. Juan Luis Jiménez & Carmen García, 2012. "“Corruption and local politics: does it pay to be a crook?”," IREA Working Papers 201212, University of Barcelona, Research Institute of Applied Economics, revised Jun 2012.
    9. Xavier Fageda & Marta Gonzalez-Aregall, 2012. "“Regulation of Port Charges in Spain: Global versus Local Competition”," IREA Working Papers 201217, University of Barcelona, Research Institute of Applied Economics, revised Oct 2012.

    More about this item

    Keywords

    fiscal federalism; equalisation; secession; Valle d’Aosta; País Vasco. JEL classification:H70; H73; H77;

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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