Fiscal Equalization Schemes and Subcentral Government Borrowing

28 Pages Posted: 28 Oct 2016 Last revised: 4 Jan 2017

See all articles by Salvador Barrios

Salvador Barrios

European Commission, JRC - IPTS

Diego Martínez Lopez

Universidad Pablo de Olavide

Date Written: September 16, 2016

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.

Keywords: Fiscal Equalization Schemes, Government Borrowing, Public Borrowing, Subnational Borrowing, Fiscal Capacity, Canada, Germany, Spain

JEL Classification: R5, H7

Suggested Citation

Barrios, Salvador and Martínez Lopez, Diego, Fiscal Equalization Schemes and Subcentral Government Borrowing (September 16, 2016). ADBI Working Paper No. 595, Available at SSRN: https://ssrn.com/abstract=2853302 or http://dx.doi.org/10.2139/ssrn.2853302

Salvador Barrios (Contact Author)

European Commission, JRC - IPTS ( email )

Edificio Expo
C/ Inca Garcilaso s/n
Seville, 41092
Spain
34 954 48 82 08 (Phone)
34 954 48 82 08 (Fax)

Diego Martínez Lopez

Universidad Pablo de Olavide ( email )

Ctra. Utrera, Km.1
Sevilla, Seville 41010
Spain

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