Decentralisation, Regulatory Burden and Economic Development in Spain
31 Pages Posted: 4 Dec 2006
Date Written: November 23, 2006
One of the contributions of the Chicago School to economic theory is that of underlining the importance of compliance costs on entrepreneurial activity and economic growth. From a business perspective, complying with general regulations and administrative red tape is a costly burden that may affect the competitiveness of the economy and the overall efficiency of the system. The main purpose of this paper is to estimate the effect of these compliance costs on Spanish regional economic development. The current situation of the State of the Autonomies in Spain provides a suitable scenario to test some of the main implications of the abovementioned thesis of considering regulation and compliance as costs for businesses. Indeed, the decentralisation of legislative and regulatory competences from the Central Government to the so called Self-governing Communities (Comunidades Autonomas) - which began in the early 1980s and has been progressively developed until these days - has generated a substantial variety of situations that may turn to be useful in empirically evaluating the effect of the exercise of the legislative and regulatory competences by the Self-governing Communities on their regional economic development and business activity.
In practice, it is difficult to determine whether Spanish (or any other) authorities regulate in excess or not. The optimum level of regulation is nearly impossible to determine, among other issues, because it depends on the quality of regulation - which is very difficult to evaluate. However, it is possible to estimate the impact of the intensity of normative and regulatory activity of the Self-governing Communities on their regional economic performance. This paper aims to evaluate the evolution of legislative and regulatory decentralisation in Spain and its impact on economic development of the Spanish Self-governing Communities between 1988 and 2005, on the basis of certain objective proxies for legislative and regulatory activity (such as the number of pages published in the several Spanish official journals and legislative collections).
Keywords: Regulation, Regulatory Burden, Decentralisation, Self-governing Communities, Regions, Federalism, Economic Development
JEL Classification: H77, K20, R50
Suggested Citation: Suggested Citation