Tasos Kitsos (p), Antonios Proestakis

Electoral politics and clientelism are not new notions. Yet, the, often suspected, pork barrelling activity has been difficult to identify until recently. A relatively recent trend involves studies utilising publicly available data on resource allocation and electoral results and being able to econometrically derive evidence of political considerations in the allocation of resources.

This paper examines the role of political partisanship and the electoral cycle in the allocation of funding from the central to local government in Greece between 2003 and 2010. A panel dataset which combines data from the Greek local and national elections and municipalities’ budgets for the period 2003-2010 is used to run a fixed-effects model specification. In this way, it is possible to test whether the political alignment between the local and national government as well as the stage of the political business cycle impact on the allocation of government grants to municipalities.

The findings suggest that municipalities which are politically aligned to the national government receive more grants in the run-up to national elections. This is evidence of pork barrelling and the political business cycle considerations in the allocation of resources. The results call for greater fiscal decentralisation in order to reduce the dependency relationship between the local and national government levels and eradicate the use of intergovernmental transfers for political gain.

Peter McGregor (p), Katerina Lisenkova, Alastair Greig, Graeme Roy, Kim Swales

There is considerable momentum in the UK, Europe and across the world towards greater decentralisation of fiscal powers. The devolution of powers over public spending is typically motivated in terms of the efficiency gains emphasised by the fiscal federalism literature. The devolution of tax powers is often advocated on the basis of improved accountability and the enhanced incentive that such powers provide to Sub Central Governments (SCGs) to pursue growth-promoting policies. In this paper we explore the sensitivity of regional economies to the nature and extent of fiscal decentralistion. At one end of the spectrum – one which broadly characterises many UK regions - SCGs’ expenditures are governed by a block grant system, with very limited (if any) devolution of taxes. At the other end is full fiscal autonomy – control over public spending and universal autonomous taxes. And there are several options in between.
The OECD makes a distinction among “strict tax sharing”, “soft tax sharing” and “autonomous taxes” (Blöchliger and Nettley, 2015). Under strict tax sharing tax revenues accrued by the SCG meet an “individual proportionality” criterion (Blöchliger and Petzold, 2009); the revenue generated to the SCG from a tax is strictly related to the amount of revenue generated on its territory. Soft tax sharing refers to instances, like the Australian General Sales Tax (the equivalent of value added tax ), where revenues are collected centrally and redistributed across the Australian states based on need. The rates and revenues associated with autonomous taxes are controlled by the SCG.
In this paper we use an intertemporal computable general equilibrium (CGE) model of a SCG region to explore the macroeconomic consequences of a range of regional fiscal frameworks that capture, in a stylised manner, key aspects of actual regional fiscal frameworks. In particular, we assess the argument that greater regional fiscal autonomy improves SCGs’ incentives to pursue growth-enhancing policies.
Keywords: Sub Central Governments; Regional fiscal autonomy; computable general equilibrium.
JEL codes: D58, R13, R15, H24, H71

Vladimir Klimanov (p), Anna Mikhaylova

At present, the system of intergovernmental fiscal relations in the Russian Federation is characterized by several contradictory tendencies. The forms of unconditional transfers and inconsistency of a discernible trend in their distribution to the regions shows the absence of linkage between intergovernmental transfers and the strategic priorities of the country's development as a whole.
A new effective management tool to support the regions which was introduced in active practice in 2017 is the signing of agreements on the federal subsidies provision. The peculiarity of such agreements is that they stipulate the fulfillment of specific conditions (performance indicators), in case of non-fulfillment of which the region is obliged to return the provided budget funds.
In order to increase the financial independence of Russia’s regions, it seems necessary to conduct a radical consolidation of subsidies. At the same time, a significant part of intergovernmental subsidies is proposed to be liquidated.
Thus, the results of the analysis showed that intergovernmental transfers have a significant impact on the economy of every region. Obviously, the transfers to agriculture in recent years are effective, taking into account both the amount of subsidies, the amount of financing, and the maximum controllability of these transfers. In this regard, the impact of transfers provided to the agricultural sector in the regions was proved using regression analysis based on the 2015 statistics on the production and profitability of agricultural organizations in each region.
In general, the transformation of the system of intergovernmental transfers in the future will largely depend on various political decisions and changes in macroeconomic conditions in the country. In any case, intergovernmental transfers will remain the most effective instrument for regulating regional development.

Patrizia Lattarulo (p), chiara agnoletti, chiara bocci, claudia ferretti

This work estimates the possible tax-revenue and distributive effects deriving from the revaluation of the real estate values on which taxation is based. In many European countries, the main revenue of municipalities comes from property taxation, housing being considered the preferred tax base for financing local service supply. However, the updating of property values is a much controversial issue, and its role is not always properly understood in policy. As a matter of fact, it represents an important tool of economic policy, since whether to operate it or not may have important territorial and distributive implications. The impacts of public policies in this area can be assess through the information on real estate available from the Land Registry. The resulting simulations suggest that a new assessment of the taxable base may re-establish a fiscal rationale based on the benefit principle, and have significant redistributive effects.