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interregional redistribution as transfers of resources from rich to poor regions
that allow the latter to exercise political discretion on the transfers received.
In addition to these relatively small tranfers, the Spanish system contains a
number of programs that commit interregional redistribution of resources to
the provision of certain services by regional governments, most notably edu-
cation and healthcare. The more services provided by the region, the higher
its budgetary needs. Accordingly, there are a number of programs in place to
bridge the gap between resources and needs across all ACs. 12
The combined effect of service provision decentralization, the increase in
transfers to regions, and the centralized nature of income transfers generates
very high levels of redistribution across territories in Spain. The fiscal flows of
public expenditure in general, and social security in particular, generate signif-
icant redistributive effects across regions. These flows shape Spain's geography
of income inequality and nurture distributive tensions between those parties
and regions benefiting from the status quo and those parties and regions that
feel unduly exploited by an excessively centralized fiscal structure. Figures 7.2
and 7.3 and Table 7.3 examine more closely the nature of these effects and
the main patterns in Spain's geography of inequality. Figure 7.2 displays, for
different periods of time, the relationship between GDP per capita and the net
regional balance in terms of all policies by the central public administration.
Figure 7.3 displays a similar analysis but focusing more narrowly on the ter-
ritorial incidence of contributory social security. Finally, Figure 7.4 exploits
a series of household budget surveys 13 to compute the level of inequality by
region and over time between 1984 and 2000. 14
Throughout the period 1991-2005 there is a very strong and negative cor-
relation between regional GDP per capita and the net balance obtained by each
of the regions. This applies both to the overall central public administration
activity ( Figure 7.2 ) and to the flows of contributory social security ( Figure
7.3 ). Though the relative positions of specific AC changes within each period,
12 These include the Fondo de Garantia , created for the period 1997-2000 to ensure that all
ACs could meet the demand for public services; and the Fondo de Suficiencia , a fund that
covers the gap between ACs' budgetary needs and the resources obtained (either through their
own taxation or other funds). These additional transfers are conditional, that is, tied to the
provision of specific services on behalf of the central government until 2001, and unconditional
after 2001, when most regions assume control of health policy and the resources to cope
with it. Because these are levelling funds, they are automatically reduced if, for instance, fiscal
autonomy increases and regions collect more revenues through their own taxes. The definition
of budgetary needs, and therefore of the leveling needs, was very comprehensive and included
all policy domains. Since 2009, the levelling of needs applies only to education, health, and
social services.
13 Througout this section the indicator of inequality used is the Gini coefficient for household
income per equivalent adult at the regional level. These figures are calculated by the author on
the basis of the income surveys available at the Luxembourg Income Study.
14 The lines in Figures 7.2 through 7.4 correspond to the average values of the variables displayed
in the x and y axis.
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