On the Political Determinants of Intergovernmental Grants in Decentralized Countries: The Case of Spain

Abstract

This article examines the effect of political variables on the gains obtained by Spanish regions in periodical bargaining of the intergovernmental financing agreements and on the regional distribution of discretional earmarked grants. First, we find that the relationship between gains in transferred revenues and on regional public debt stocks depends on the period and the specific issues discussed in the corresponding negotiation. Second, we show that the most discretional program of earmarked grants is strongly driven by electoral strategy. National incumbents tend to allocate intergovernmental transfers where there are competitive regional elections. We also show that earmarked grants are allocated in those regions where the incumbent performs better in national elections and, especially, in those where there are more seats to be won.