45th Congress of the European Regional Science Association: "Land Use and Water Management in a Sustainable Network Society", 23-27 August 2005, Amsterdam, The Netherlands
Recent contributions to the literature on public choice have examined the effects of regional fiscal balances and unsuitable decentralization mechanisms on the capability of regional governments to make expenditure decisions. We focus on Spanish regional case. Our results suggest that, given the negative relationship between additional improvements in tax revenue retention rates and the propensity to subsidize, the decentralization of revenues would be a more effective measure. Thus, the enhancement of the autonomous expenditure capacity of regional governments would be a more appropriate policy to adopt.