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expenditure by all levels of government in Spain (national, regional, and
local). 11 The second series (SE%GDP) displays the evolution of total social
expenditure as a percentage of GDP. Next, I present the same indicator but
focusing only on welfare state transfers and excluding health and active labor
market programs (TR%GDP). The next indicator (DCE TR) measures the
proportion of welfare state transfers that are actually decentralized. Finally, I
include a measure of the proportion of all interregional transfers that has a clear
redistributive purpose (the Fondo de Compensacion Interterritorial, or FCI).
This figure brings out a number of interesting patterns. Clearly, there has
been a fast-paced process of decentralization on the expenditure side, primarily
due to the steady transfer of powers to regional governments in areas such as
infrastructural development, education, and more recently, the decentraliza-
tion of health expenditures to all AC. Interestingly, this process has taken place
along with a significant increase in levels of social policy effort. This increase
has the same trend for services (mostly health) and for welfare transfers, and
was concentrated between the period immediately following the general strike
of 1988 and the economic recession in 1993. From the mid-1990s onward,
income transfers have essentially remained stable until 2004-2005, whereas
the effort in public services increases slightly during the early 2000s. Overall,
these data reveal that decentralization and social policy expansion can coex-
ist perfectly over sustained periods of time. The data also reveal two other
interesting features of Spain's fiscal structures. Notably, the decentralization
of public expenditures has hardly affected income transfers. At the end of
the period of scrutiny, barely 4 to 5% of all income transfers are controlled
by regional authorities. This percentage corresponds mostly to a plethora of
social assistance and minimum income schemes put forward by regional gov-
ernments since the late 1990s (Moreno 2007 ; Nogera and Ubasart 2003 ). These
policy initiatives notwithstanding, the bulk of transfers in the Spanish welfare
state remain under control of the central government. Finally, as the process
of decentralization unfolds the amount of interregional transfers also grows.
As regions assume control over infrastructure, education, and health, the gov-
ernment transfers more and more resources to enable them to meet the costs
of providing such services. As the size of these transfers grows, so does the
demand for resource redistribution between regions. Interestingly, the share of
total transfers specifically and purposefully devoted to interregional redistri-
bution (FCI) accounts for a very small proportion of interregional transfers.
This small share is potentially deceiving though. Recall that this topic defines
11 The sources for the different series are as follows: REG EXP, data provided by the Ministry of
Finace; data on total social expenditure as a percentage of GDP (SE%GDP) and income transfers
as a percentage of GDP (TR%GDP) come from the OECD Social Expenditure Database (2009);
likewise, the index of decentralization of welfare transfers (DEC TR) is computed as the ratio
between the budgetary importance of decentralized transfers to the value of total welfare
transfers on the basis of the OECD social expenditure database. Finally, the share of the FCI
relative to total interregional transfers makes use of the BADESPE database (Institute for Fiscal
Studies, Ministry of Finance).
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