Fiscal Transfers in the Spatial Economy

Investigaciones Regionales - Journal of Regional Research, 2018

This paper presents a conceptual framework to analyse the redistributive impact of transfers in the context of a decentralized economy. The framework is illustrated by means of a numerical example that describes an economy with three regions and two levels of government―the central level and the regional level. With this set up, the paper analyses a variety of transfer systems and considers its effects on redistribution using as benchmark the distribution going on in the centralized version of this economy, in which tax capacity is unevenly distributed across the three regions and central government public expenditure is distributed across regions according to their population.

International Tax and Public Finance, 2013

This paper analyzes the impact of fiscal equalization on asymmetric tax competition when positive agglomeration externalities are present. It shows that equalization of standardized tax revenue improves the spatial allocation of capital provided that agglomeration externalities are sufficiently strong.

Journal of Economic Dynamics and Control, 2012

Regional income disparities have increased in many European countries recently, even as national and supra-national policy instruments were created to correct them. To explain these evolutions, we develop a two-region, two-sector model with migration and public investment in infrastructure and education. Accumulation and creation of new ideas and technologies as well as migration are at the core of differential regional growth. In this framework, we assess the effectiveness of structural funds, modelled on the EU policy. In a numerical example calibrated to Portugal, we find that, to diminish the initial gap in income per capita, the backward region needs to receive over 8% of its own GDP in structural funds, while the actual disbursements were around 4%. We also find that maximizing innovation in the backward region conflicts in the short run with the goal of maximizing its income per capita. Moreover, the rich region has an incentive to bias the allocation of structural funds towards human capital formation.

The ANNALS of the American Academy of Political and Social Science, 2009

Cities are the location of the great majority of economic activity in the United States, and produce a disproportionate share of output. It is thus critical for the economy's long term growth that cities operate efficiently. In this paper, we review the basic determinants of output growth, with a focus on productivity growth in cities. We then explore the effects of a particular distortion in politically fragmented metropolitan areas. After documenting the interdependence of the suburbs and central city of a metropolitan area, we develop a model that embodies many of the empirically verified aspects, including agglomeration economies and public goods. After calibrating the model to outcomes for Philadelphia, we use it to simulate various policy changes. We conclude that, under the model, some kinds of fiscal redistributions can provide benefits in both cities and suburbs.

RePEc: Research Papers in Economics, 2008

This paper proposes a multi-regional general equilibrium model with capital accumulation to analyze the economic impact of the spatial distribution of public capital formation. This model is solved and calibrated by using data for Spanish economy in order to simulate some comparative dynamic exercises of fiscal policy changes. These analyses illustrate the role that public investment plays in generating the existing imbalances in regional development. This is done by computing the spillover effects and the opportunity costs of regional distribution of public investment. Finally, from the analysis we derive two rankings of regional priorities in public investment: one based on the criterion of reducing regional disparities, and other based of an efficiency criterion.

… de Economía Pública: 5 y 6 …, 2009

This paper investigates the effect of fiscal equalization on the spatial distribution of public activities and, therefore, on regional disparities in per capita GVA. With this aim, we use a simple theoretical model which is tested using data for the Spanish regions over the period 1986-2006. Our results show that a decentralized scenario with full equalization implies less differences across regions in per capita GVA and a more important share of public spending (production) on it in poorest territories, in comparison with a case in which decentralization is not accompanied by full fiscal equalization.

2003

This paper looks for empirical evidence on spillovers occurring between central cities and their suburbs, both on the fiscal side and on the growth of population and output. To test these hypotheses we specify a dynamic model with population and output both in the central city and in the suburbs as endogenous variables and with fiscal variables in the central

2020

Spillovers have attracted wide attention in the areas of research in economics during the past decades. The reason for the interest in the topic lies in their important role in endogenous growth theory and the explanation of productivity growth. This paper investigates the spatial spillover of different types of public infrastructure on economic growth across EU-28 NUTS-II regions during 1995-2015. Particularly, we developed the previous studies by consedeing spillover in all types of the GDP sector composition including agriculture, industry, and services. The spatial Durbin panel data model is employed to consider spatial spillovers of both public infrastructure and economic growth. Empirical results show the positive spatial spillovers of communication infrastructure in all the sectors. The spillover effect of transport infrastructure is positive in the service and agricultural sector, whereas it is negative in the industry sector. Moreover, the spillover effect of local infrastr...

Argentina has an important system of vertical transfers with a compensatory aim including the convergence across sub-national regions. However, there still exist high levels of asymmetries among the country provinces. Extending Martin and Rogers' FCM including nontradable goods and public employment we analyse the effect on economic activity location that follows to changes on the regional distribution of transfers. An increase in the share of transfers a region receives positively effect the production of manufactures the higher are: transaction costs of goods produced under increasing returns to scale; the share of transfers that goes directly to consumers instead of local governments; the elasticity of substitution between differentiated goods; the share of consumers' expenditure on manufactures via-as-vis on nontraded goods.

The Annals of Regional Science, 2012

Private investment subsidies are a key instrument for regional policy making to foster the economic development in lagging regions. In this paper, we analyze their effect on labor productivity growth for German labor market regions for the period from 1994 to 2006. A spatially augmented multiplicative interaction model based on neoclassical growth theory is used, which allows us to assess the marginal effect of regional policy proxied by overall payments of the main German regional development program on the region's convergence speed conditional on its initial income position as well as policy-related spillovers from its spatial neighborhood. Our results show a statistically significant positive effect of regional policy on labor productivity growth, which increases, the further away the supported region is from its steady-state income level, and the more grants are provided to its geographical neighborhood. The latter effect highlights the existence of positive spatial spillover effects from regional policy in Germany, which enhance the attractiveness of the whole macro region for private sector investments. The additional growth stimulus provided by a 1 % increase in the region's funding volume is thereby related to an up to 0.3 % gain in terms of labor productivity growth. For regions with the highest initial gaps to steady-state income in the sample distribution, the regional policy stimulus accounts