Resumen de Decentralization and spatial distribution of regional economic activity: does equalization matter?

Santiago Lago Peñas , Diego Martínez López

• This paper investigates the effect of fiscal equalization on the spatial distribution of public activities and, therefore, on regional disparities in per capita GVA. With this aim, we use a simple theoretical model which is tested using data for the Spanish regions over the period 1986-2006. Our results show that a decentralized scenario with full equalization implies less differences across regions in per capita GVA and a more important share of public spending (production) on it in poorest territories, in comparison with a case in which decentralization is not accompanied by full fiscal equalization.