Fiscal Imbalances in Asymmetric Federal Regimes. The Case of Spain

The dispute over the manner of computing fiscal imbalances is not a technical one. Different methods serve different purposes and these purposes are political rather than simply economic. They differ basically in the consideration that territorial jurisdictions may merit. This is whether they are being seen much more than simply a pure geographical aggregation of individuals and their net fiscal residuals. Even for those authors who limit those imbalances as the result of personal redistributive fiscal flows, our paper shows that this does not seem to happen in Spain. Indeed, on the expenditure side, we do not observe a systemic pattern for the regional flows that properly matches personal income differences. Regions with similar income levels receive clearly discretional resources from the central government. This is the case not just for the monetary flow method, but also for the tax benefit incidence approach, despite the way in which the externalities of what are assumed to be ‘public goods’ spills over. In order to test whether this bias is political, purely random, or the result of a structural agglomeration or scale economies effect, we call for more data analysis. We need for a robust estimation of those factors a panel data approach to the composition of the observed imbalances. Transparency in this sense is the best strategy for refocusing the fiscal territorial debate in Spain.