Is regional redistribution harmful for growth? An empirical analysis on the Spanish Autonomous Communities. 2001–2016

Authors: Guillem López-Casasnovas and Joan Rosselló Villalonga

Regional Science Policy and Practice, Vol. 11, No 5, 849-864, November, 2019

In this paper we estimate the relationship between the growth rate of Spanish regions' GDP and the level of regional redistribution. We will do so considering the period 2002–2016 using a panel of 17 Spanish regions. Our estimates suggest that regional redistribution has a negative impact on regional GDP growth rates, regardless of whether the region is recipient or donor of fiscal transfers. This suggests that territorial redistribution as it comes out from the central transfers is harmful for growth. A policy implication of our results is that donor regions do find in the Spanish context a solid argument for secession, especially in a framework where regional governments, or regional interests, are not well represented in the Spanish institutions in order to modify the present state of affairs.