Interregional Redistribution Research Articles

Fiscal equalization and lobbying

Inter-regional redistribution through tax-base equalization transfers is examined in a setting in which taxpayers, organized as lobby groups, influence policy making. With lobbying only at the local level on tax rates, social welfare maximization implies, ceteris paribus, high (low) equalization rates on the tax bases backed by the strong (weak) lobby groups. With lobbying also at the central level, equalization is distorted downward on all tax bases if the pressure groups are similar in terms of lobbying power. It is instead distorted downward (upward) on the bases backed by strong (weak) groups if they are highly heterogeneous. In the latter situation, a uniform equalization structure may perform better than a differentiated one.

Net fiscal flows and interregional redistribution in Italy: A long-run perspective (1951–2010)

This paper carries out a long-run reconstruction of a discontinuous time series of net fiscal flows for Italian regions and macro-regions from 1951 to 2010. This evidence is the basis to put forward an assessment on the intensity of interregional redistribution operated by public sector. The main result of the paper is that even if the amount of resources transferred to Southern Italy from the rest of the country has been significant and increasing over time (at least up to the end of the 1990s), redistribution cannot be judged disproportionately large, in the light of income differences among regions, the public commitment in regional policies and the constitutional principles of equal access of citizens to the basic public services. Secondly, historical analysis of data and inspection of facts indicate that the relationship between the intensity of interregional redistribution and the financial effort of regional policies is weak. This supports the view that increasing NFFs have little served the purpose of regional convergence; rather, the rise of imbalances seems to be mainly connected to the overall escalation of public expenditure, following the institutional break occurred in mid-1970s with the establishment of Regional Governments.

When Are Federations More Unequal? The Political Economy of Interregional Redistribution in Developing Federations

Why do some countries redistribute more to poorer regions than others? This paper explores which factors explain variation in the degree of interregional redistribution among countries between 1983 and 2010. The main argument is that interregional redistribution increases with the need and capacity of strong presidents to build territorial coalitions with governors from poorer regions and, by implication, decreases with the ability of strong governors in rich districts to resist pressures to extract resources from their units. Using a multilevel structural equation model (the Generalized Linear Latent Multilevel Model, GLLAMM), the study analyzes these and competing claims on the determinants of interregional redistribution using original data from the subnational units of four types of cases, ranging from decentralized and federal to centralized, unitary countries. Empirical results indicate that the type of redistributive coalition between presidents and governors complement purely structural and institutional models to explain fiscal redistributive outcomes in the context of sharp regional inequality.

Redistribution and Risk Sharing in Italy: Learning from the Past

This paper investigates the role of public policies in Italy by assessing both the redistribution and risk sharing functions of interregional Net Fiscal Flows over a long time horizon. Its main novelty relies on the comparative approach that allows to contrast results obtained for two periods characterized by relevant diversity about design of regional policy and dynamics of regional convergence. Moving from 1951–65 to 1983–92, interregional redistribution increases from 10%–18% to 19%–30%, with a clear rise in the share of current to total expenditure. Concerning risk sharing, the role of fiscal policy in smoothing out idiosyncratic risks is weak in 1951–65 but significant in 1983–92. Although based on a specific case, we believe that the evidence provided in this paper allows to draw more general conclusions: when assessing the regional redistributive and risk sharing power of national fiscal policies, one should carefully take into account many different factors related to the existing policy regime, the main being the composition of government spending between current expenditure and public investment.

Fiscal Equalization Under Political Pressures

We examine the design of fiscal equalization transfers aimed at inter-regional redistribution in a setting in which special interest groups distort the fiscal policies of local governments. Equity always calls for tax-base equalization while efficiency calls for tax-base equalization of fiscal capacities backed by strong lobby groups and for tax-revenue equalization of those backed by weak lobby groups. Hence, it is optimal to rely only on tax-base equalization if the special interest groups are similar in terms of lobbying power, whereas a mixed system is optimal if they are highly heterogeneous. Tax competition reinforces the role of tax-base, while tax exporting that of tax-revenue, fiscal equalization.

Spending Review e divari regionali in Italia

This paper deals with the asymmetric regional effects of austerity policies in Italy in the current crisis. We discuss how austerity has caused a substantial downsizing of interregional redistribution, thus amplifying the economic downturn in Southern regions. First, we look at the regional distribution of the cost of austerity in terms of both higher tax burden and cuts in public expenditure. Then, we focus on the declining pattern experienced by both public investment and industrial policy.

Preferences for Inter-Regional Redistribution

What explains individual support for inter-regional redistribution? Few studies examine support for regional redistribution, even though such issues are politically salient in many democracies. We test models that hypothesize that such preferences are affected by regional and individual income, as well as other arguments beyond the traditional political economy framework. We focus on informational assumptions and implications of these models with an experiment embedded in a nationally representative survey in Spain. We randomly inform some citizens of the true relative income of their region to assess the impact of this information on regional redistribution preferences. We find that citizens’ learning about their region’s relative position affects these preferences in a manner consistent with some of the political economy models. We also find some support for out-group concerns as an important factor. The findings have implications for the applicability of economic models to explaining support for regional arrangements.

On the size and determinants of inter-regional redistribution in European countries over the period 1995–2009

The aim of this paper is to analyse cross-country differences in the degree of inter-regional redistribution achieved by means of taxes and expenditures in 21 European countries over the period 1995–2009. We rely on a standard approach based on the observation and comparison of both primary and disposable household income at regional scale. Once the redistributive effect in each country is quantified, we try to explain the drivers of cross-country time-series differences. According to our estimates, cross-national standard deviation is significant and much higher than time variation. Secondly, inter-regional redistribution is strongly and positively related to personal redistribution by means of taxes and social benefits in cash; and is negatively related to both the extent of regional disparities in primary income and to the degree of political and fiscal decentralization.

On the Size and Determinants of Inter-Regional Redistribution in European Countries Over the Period 1995-2009

The aim of this paper is to analyse cross-country differences in the degree of inter-regional redistribution achieved by means of taxes and expenditures in 21 European countries over the period 1995-2009. We rely on a standard approach based on the observation and comparison of both primary and disposable household income at regional scale. Once the redistributive effect in each country is quantified, we try to explain the drivers of cross-country time-series differences. According to our estimates, cross-national standard deviation is significant and much higher than time variation. Secondly, inter-regional redistribution is strongly and positively related to personal redistribution by means of taxes and social benefits in cash; and is negatively related to both the extent of regional disparities in primary income and to the degree of political and fiscal decentralization.

Regional Disparities and Government Quality: Redistributive Conflict Crowds Out Good Government

In this paper, we argue and provide empirical evidence to support the claim that higher income differences across regions increase the salience of interregional redistribution and, as a result, crowd out policies aiming towards improvements in government quality or efficiency. In the presence of greater regional disparities, the balance of politics may tilt towards redistributive concerns and away from government efficiency considerations, especially since the latter can be opposed by organized public sector interest groups. Our empirical analysis, based on a sample of 22 Organization for Economic Co-operation and Development (OECD) countries over the period from the mid-1990s to 2005, supports our basic intuition that regional disparities may lead to territorially based redistributive conflict to the detriment of government quality.

The Analysis of Stability of Inter-Regional Water Resource Redistribution

Accurate prediction of future water distribution using available assessment data is crucial for every country to construct water conveyance projects and formulate strategies to redistribute national water resources .This paper proposes how to use Markov model to test whether the inter-regions which are short of water resource compared to their needs of water resource .The water resource is transited from water-rich areas to water-deficient areas to solve this problem .We hope the water resource in each region reaches a stable level when the water redistribution process and the transition matrix is used to test the stability .We consider the transition process as a Markov process, to analysis and calculate the limiting water production distribution .Also ,This paper propose a condition when stable limiting water distribution exists.

Party Competition and Preferences for Inter-regional Redistribution in Spain

The main contribution of the article is to highlight the fact that preferences for inter-regional redistribution in Spain are crucially shaped by the dynamics of party competition. First, I show that it is not regional income but the saliency of the second dimension of party politics that drives preferences for regional redistribution. Second, I analyse whether the relationship between partisan attitudes and redistributive preferences is conditional on the saliency of the second dimension across various regions. Third, I also investigate whether the relationship between partisan attitudes and redistributive preferences changes between cohorts within a given party system.

Decentralisation and interregional redistribution in the Italian education system

The aim of this paper is to evaluate the potential impact of the reform designed to decentralise public education in Italy, currently under discussion, on interregional redistribution. The central government has always played a prominent financial and administrative role in the provision of compulsory education in Italy. This has had a strong redistributive effect on per-capita GDP across the regions of the country. The current fiscal decentralisation reform may well involve the education sector, as regional and local authorities are granted greater autonomy with regard to the provision and funding of educational services. Starting from certain plausible assumptions regarding the forthcoming fiscal powers, decentralisation and the expenditure levels set by the central government, this paper evaluates how these changes may affect the degree of interregional redistribution accomplished by the education system.

Inter-regional Insurance and Redistribution – A Non-parametric Application to Russia

The paper examines inter-regional insurance and redistribution of Russia's fiscal system from 1995 to 2007. We use non-parametric methods for robustness and to tackle econometric problems of endogeneity and poolability. We will also use several specifications of variables. We find that the Russian inter-regional insurance system should be considered a stabilizing scheme against tax income and budget expenditure shocks, rather than against gross product or population income shocks, as typically assumed in literature considering data of other countries. Furthermore, we find evidence that the differences in the insurance estimates are mainly due to Federation-wide policy changes rather than a result of asymmetric treatment of regions.

Assessment of geographical directions of investment flows

An indirect approach to assessing interregional movement of financial resources is presented. Possibilities for analyzing the regional investment potential are found using the indicators of gross profit and gross mixed income from national accounts statistics and the estimated indicator of potential investment resources that is generated based on several sections of regional statistics. Similar results have been obtained that also point to an increased regional financial potential during intense economic growth. A special factor for assessing the investment position of different regions and industries was generated based on the sender-addressee principle. The behavior of this coefficient allows one to assess the potential extent and direction of interregional redistribution of investment resources.

Does Fiscal Federalism Promote Regional Inequality? An Empirical Analysis of the OECD, 1980–2005

Sorens J. Does fiscal federalism promote regional inequality? An empirical analysis of the OECD, 1980–2005, Regional Studies. This paper explores the relationship between fiscal federalism, understood as institutionalized regional economic self-rule, and convergence in regional per capita incomes. The principal economic argument against fiscal federalism is that, unless paired with generous equalization grants, it will enhance regional inequalities by reducing inter-regional redistribution. Does the evidence support this claim? Multilevel spatial regressions on primary sub-national jurisdictions in twenty-five Organisation for Economic Co-operation and Development (OECD) countries show that lower-income regions tend to catch up with higher-income regions only when they enjoy substantial economic powers. Indeed, there is more convergence across member states of the European Union than across regions within almost any of the European Union member states. Fiscal federalism may pose less serious tradeoffs than commonly assumed.

The drivers of interregional policy choices: Evidence from Italy

Theoretical developments in political economy analyses of intergovernmental transfers identify several factors previously ignored in the empirical literature and emphasize the importance of institutional details. Combined, these two developments create a degrees of freedom problem and make cross country samples less meaningful. This paper circumvents these problems by examining an Italian regional panel that minimizes the set of institutional conditioning factors and is large enough to examine a comprehensive set of explanatory variables. The estimates confirm the relevance of most political determinants and of standard economic and socio-demographic determinants of interregional redistribution. Differences in type of expenditures and intergovernmental relations are also considered.

Inter-regional redistribution through infrastructure investment: tactical or programmatic?

In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more 'Political power' still receive more investment. These districts are those where the incumbents' Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of 'Political power' and per capita income.

Inter-Regional Redistribution Through Infrastructure Investment: Tactical or Programmatic?

In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more ‘Political power’ still receive more investment. These districts are those where the incumbents’ Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of ‘Political power’ and per capita income.

Interregional Redistribution and Mobility in Federations: A Positive Approach

The paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice. We find that paradoxical consequences of inter-jurisdictional transfers arise if people are mobile: while self-sufficient regions are nec- essarily identical with respect to policies and average incomes in our model, interregional redistribution always leads to the divergence of regional policies and per capita incomes. Thus, interregional redistribution prevents interregional equality. At the same time, however, transfers may allow for more interpersonal equality among the inhabitants of each region. The voting population may therefore in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence. Empirical evidence from panel data from OECD countries and Candian provinces is consistent with the theory.