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Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case

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  • Santiago Lago-Peñas

    (Department of Applied Economics, University of Vigo, Campus universitario, 32004 Ourense, Spain)

Abstract

High debt autonomy and low tax autonomy often characterize evolving federations, making the bailout hypothesis very attractive in resolving subcentral government deficits. However, meeting both conditions is not enough to conclude that bailout expectations are the main reason for a potential deficit. There are many other factors affecting expectations and the real behavior of the agents involved: central government, subcentral governments, and the financial markets. Empirical research is the only means by which to determine the relevance of the bailout problem in each situation. To demonstrate this argument, the author describes an exhaustive analysis of the Spanish case. The main conclusion is that deficit seems to be better understood by a more traditional model of fiscal choices than by bailout expectations.

Suggested Citation

  • Santiago Lago-Peñas, 2005. "Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case," Environment and Planning C, , vol. 23(3), pages 437-453, June.
    • Handle: RePEc:sae:envirc:v:23:y:2005:i:3:p:437-453
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    Cited by:

    1. Benny Geys & Federico Revelli, 2011. "Economic and Political Foundations of Local Tax Structures: An Empirical Investigation of the Tax Mix of Flemish Municipalities," Environment and Planning C, , vol. 29(3), pages 410-427, June.
    2. Agustín Molina†Parra & Diego Martínez†López, 2018. "Do Federal Deficits Motivate Regional Fiscal (Im)Balances? Evidence For The Spanish Case," Journal of Regional Science, Wiley Blackwell, vol. 58(1), pages 224-258, January.
    3. Salvador Barrios & Diego Martínez-López, 2017. "Fiscal equalization schemes and subcentral government borrowing," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 4, pages 130-160, Edward Elgar Publishing.
    4. Maria El Khdari, 2019. "Déterminants des transferts intergouvernementaux : le cas du Maroc," Post-Print hal-02137651, HAL.
    5. Maria EL KHDARI, 2015. "Déterminants des transferts intergouvernementaux : le cas des communes Marocaines," Working Papers 201531, CERDI.
    6. Pilar Sorribas-Navarro, 2006. "(When) Are Intergovernmental Transfers Used to Bail Out Regional Governments? Evidence from Spain 1986-2001," Working Papers 2006/7, Institut d'Economia de Barcelona (IEB).
    7. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05141, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Isabel Argimón & Pablo Hernández de Cos, 2012. "Fiscal Rules and Federalism as Determinants of Budget Performance," Public Finance Review, , vol. 40(1), pages 30-65, January.
    9. Germà Bel & Antonio Miralles, 2010. "Choosing between Service Fees and Budget Funding to Pay for Local Services: Empirical Evidence from Spain," Environment and Planning C, , vol. 28(1), pages 54-71, February.

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