DO FEDERAL DEFICITS MOTIVATE REGIONAL FISCAL (IM)BALANCES? EVIDENCE FOR THE SPANISH CASE

Agustín Molina-Parra, Diego Martínez-López
2016 Journal of Regional Science  
This paper studies the vertical and horizontal interactions existing between federal and state governments in terms of public de...cits. We estimate a ...scal reaction function for the Spanish regions over the period 1995-2010 paying special attention to the impact of federal ...scal stance on the state ...scal imbalances. Our results indicate that higher public de...cits of the central government encourage bigger ...scal imbalances at state level. This vertical interaction is interpreted in
more » ... context of yardstick competition models. We also ...nd a signi...cant impact of ...scal decisions taken by governments at the same tier of decision on a speci...c state.
doi:10.1111/jors.12328 fatcat:lpumelueojefrjknilimcebf6a