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Should large Spanish municipalities be financially compensated? Costs and benefits of being a capital/central municipality

Author

Listed:
  • Núria Bosch

    (Universitat de Barcelona & IEB)

  • Marta Espasa

    (Universitat de Barcelona & IEB)

  • Daniel Montolio

    (Universitat de Barcelona & IEB)

Abstract

This paper analyse the costs and benefits of being a capital or central municipality, where central costs are understood to be incurred specifically as a result of the problems large municipalities located at the centre of an urban agglomeration face and capital costs are understood to result from the presence of regional and/or central government institutions in the municipality. However, these two qualities might also be beneficial to municipalities, resulting in a direct increase in their fiscal capacity. Here, by estimating an equation of the expenditure needs and the fiscal capacity of Spanish municipalities with more than 75,000 inhabitants, we find that the central costs incurred by large municipalities are offset by their greater fiscal capacity, but that the same is not true for municipalities that serve as political/administrative capitals.

Suggested Citation

  • Núria Bosch & Marta Espasa & Daniel Montolio, 2013. "Should large Spanish municipalities be financially compensated? Costs and benefits of being a capital/central municipality," Working Papers 2013/6, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2013-6
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    References listed on IDEAS

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    Cited by:

    1. Laura Varela-Candamio & Fernando Rubiera Morollón & Gohar Sedrakyan, 2019. "Urban sprawl and local fiscal burden: analysing the Spanish case," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(1), pages 177-203, February.

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    More about this item

    Keywords

    Local financing; large municipalities; central and capital costs and benefits; expenditure needs; fiscal capacity;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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