IDEAS home Printed from
   My bibliography  Save this paper

Fiscal Equalization and Political Conflict


  • Cubel, Maria

    () (University of Barcelona)


In this paper we analyze the political viability of equalization rules in the context of a decentralized country. We explore the idea that when equalization rules are perceived as unfair, regions may initiate a political conflict. Regions are formed by identical individuals who, through lobbying, try to obtain a higher share from the (equalization) pool of resources. Political conflict is measured as the total contribution to lobbying. We conclude that the onset of conflict depends on the degree of publicness of the regional budget and the relative size of the regions. When regional budgets are used to provide pure public goods, full fiscal equalization is politically feasible. However, fiscal equalization is not immune to conflict when budgets are used to provide private goods or a linear combination of private and public goods. The likelihood of political conflict decreases as the regions become similar in size.

Suggested Citation

  • Cubel, Maria, 2012. "Fiscal Equalization and Political Conflict," NEPS Working Papers 9/2012, Network of European Peace Scientists.
  • Handle: RePEc:ris:nepswp:2012_009

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Le Breton, Michel & Weber, Shlomo, 2003. "Secession-Proof Cost Allocations and Stable Group Structures in Models of Horizontal Differentiation," IDEI Working Papers 210, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Mohtadi, Hamid & Roe, Terry, 1998. "Growth, lobbying and public goods," European Journal of Political Economy, Elsevier, vol. 14(3), pages 453-473, August.
    3. Joan Esteban & Debraj Ray, 2001. "Social decision rules are not immune to conflict," Economics of Governance, Springer, vol. 2(1), pages 59-67, March.
    4. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
    5. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    6. Desmet, Klaus & Le Breton, Michel & Ortuno-Ortin, Ignacio, 2006. "Nation Formation and Genetic Diversity," IDEI Working Papers 133, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-646, May.
    8. Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, vol. 42(7), pages 1295-1316, July.
    9. Robert Fenge & Jakob von Weizsäcker, 2001. "How Much Fiscal Equalization? A Constitutional Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 623-623, December.
    10. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
    11. Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
      • Jackson, Matthew O. & Morelli, Massimo, "undated". "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
    12. repec:cup:apsrev:v:95:y:2001:i:03:p:663-672_00 is not listed on IDEAS
    13. Esteban, Joan & Ray, Debraj, 1999. "Conflict and Distribution," Journal of Economic Theory, Elsevier, vol. 87(2), pages 379-415, August.
    Full references (including those not matched with items on IDEAS)

    More about this item


    political conflict; lobbying; fiscal equalization; social decision rules;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:nepswp:2012_009. 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: (Vincenzo Bove). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.