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  • Peter Claeys

    ()

    (Faculty of Economics, University of Barcelona)

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.

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File URL: http://www.ub.edu/irea/working_papers/2011/201101.pdf
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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201101.

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Length: 37pages
Date of creation: Feb 2011
Date of revision: Feb 2011
Handle: RePEc:ira:wpaper:201101
Contact details of provider: Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
Web page: http://www.ub.edu/irea/

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  1. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. A Rodr�guez-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. Teresa Garcia-Milà & Therese J. McGuire, 2002. "Fiscal decentralization in Spain: An asymmetric transition to democracy," Economics Working Papers 866, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Hansjörg Blöchliger & Olaf Merk & Claire Charbit & Lee Mizell, 2007. "Fiscal Equalisation in OECD Countries," OECD Working Papers on Fiscal Federalism 4, OECD Publishing.
  5. 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.
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