1
Ti le:
Fiscal Fede alism and he impac o In e go e nmen al G an s. The Eu opean Regional policy in Spain
Au ho :
Juan González-Aleg e
A ilia ion:
Uni e si a Au ònoma de Ba celona
Con ac :
[email protected]
Phone: (+34) 935811740
Fax: (+34) 935812292
Dp o. Economía Aplicada
Uni e sidad Au ónoma de Ba celona
Edi ici B
Campus de Bella e a
08193 Ce danyola (Ba celona)
Spain
2
Abs ac :
We suspec ha he e iciency o in e go e nmen al g an s is ela ed o he le el o iscal au onomy o
he subsidized go e nmen . In his pape we cons uc and es ima e a panel da a model cap u ing he
ole o iscal ede alism on he e ec i eness o EU S uc u al Ac ions in enhancing public expendi u e
in selec ed policy a eas. We use da a om he se en een Spanish egions o he pe iod 1993-2007.
Resul s unambiguously suppo he hypo hesis ha he e ec i eness o he ERDF dec eases wi h la ge
iscal au onomy. The ole o he Eu opean Social Fund is s ill unde analysis. These esul s could
e lec he ac ha iscal decen aliza ion in Spain has been ocused o la ge axa ion au onomy
wi hou a ec ing egional income edis ibu ion.
JEL classi ica ion: H72, H77, C33, C23.
Keywo ds: Fiscal Fede alism; In e go e nmen al G an s; Regional Policy; Panel Da a;
Acknowledgemen s
I am g a e ul o commen s and help ul sugges ions a he I ish Socie y o New Economis s mee ing
2010, he XIV Encuen o de Economía Aplicada, he XXXVI Simposio de la Asociación Española de
Economía and he ESF Explo a o y Wo kshop on Fiscal Policy a he Regional Le el and
In e go e nmen al Rela ions.
Funding
The au ho acknowledges inancial suppo om he “Ins i u d´Economia de Ba celona” unde i s
“Resea ch g an s on iscal ede alism” p og am.
3
1. INTRODUCTION
The Cohesion Policy designed by he Eu opean Union has been con ibu ing ac i ely o he
achie emen o sus ainable economic g ow h in Eu opean egions o e he las decades. The ecen
poli ical and economic de elopmen s in he EU may jus i y he e ision o some o he p inciples
d i ing he Cohesion Policy so as i can pe o m i s du y wi h equal success in he coming yea s. One
o he main challenges o ackle, which is al eady aking place, is he ansi ion o he Cohesion Policy
o he new Eu opean Union a e he mo e ecen enla gemen s o he Union, which ha e leaded o a
la ge and, in pa icula , mo e he e ogeneous, ield o applica ion o he policy. The ecen economic
c isis, will, in addi ion, pu mo e p essu e on he consolida ion o he public budge in all le els o he
public adminis a ion.
One o he aspec s ha mus be pu in o conside a ion, and he issue co e ed in his pape , is he ole
ha he di e en le els o iscal decen aliza ion achie ed in e e y Membe S a e ha e on he
mechanisms uling he Cohesion Policy. In pa icula , we will s udy he p og ams design unde he
S uc u al Ac ions1 ha pu sue he inc ease o public in es men on key a eas o g ow h. We will,
he e o e, ocus ou a en ion in hese policies whose pu pose is enhancing Public In es men , and will
y o e alua e whe he he le el o iscal decen aliza ion o he membe s a es play a ole in hei
e ec i eness.
Bo h issues, Fiscal decen aliza ion and EU in e go e nmen al g an s, ha e been add essed sepa a ely
in nume ous empi ical s udies. In mos o he cases he ocus o he s udies has been cen e ed in
es ima ing he e ec o hese policies on economic g ow h. Only e y ecen ly, some esea che s ha e
1 In he nomencla u e o he Eu opean Union, he e m “S uc u al Funds” usually e e o he ou Funds
con o ming he so-called Regional Policy (Eu opean Regional De elopmen Fund, o ERDF; Eu opean Social
Fund, o ESF; Financial Ins umen s o Fishe ies Guidance, o FIFG; and he Eu opean Ag icul u al Guidance
and Gua an ee Fund, o EAGGF which has been eplaced by he Eu opean Ag icul u al Gua an ee Fund in 2007)
while he “S uc u al Ac ions” include, in addi ion, he Cohesion Fund. In his pape , we will use bo h e ms
indis inc i ely.
4
pu hei a en ion on he impac on he dis ibu ion o public expendi u es. Bu , o ou knowledge,
he e is no p e ious wo k ying o add ess he impo ance o he simul aneous e ec o bo h policies.
Economic heo y has also adi ionally modeled he issues o iscal decen aliza ion and e ec i eness
o in e go e nmen al g an s sepa a ely. Ne e heless, e y ecen de elopmen s o economic heo y in
he ield o in e go e nmen al g an s ha e iden i ied he ole o iscal au onomy o g an ed go e nmen
in he e iciency o he g an s. Resul s, i no o ally con adic o y, a e no coinciden among he ew
s udies.
Volden (2007), o example, inds ha he e ec o g an s depends on he capaci y o he ecipien
go e nmen o e icien ly aise axes. Go e nmen s wi h g ea e ax-e iciency2 would expe ience
highe c owding-ou induced by he g an , meaning ha he g an becomes less e ec i e in enhancing
public expendi u e in a pa icula policy a ea3. Kappelle (2007) inds, ins ead, ha he g an ed
go e nmen s would unde -in es when ax-au onomy is es ic ed, pa icula ly in ich egions. In his
case, he le el o ma ching-g an s is also subop imal.
Economic heo y p obably needs o u he empi ical s udies iden i ying s ylized ac s o e which
build assump ions and de elop iche models. Bu also he public adminis a ions and he socie y in
gene al, need o be e ins umen s o judge he esul s o he se e al policies aken o e . Based on he
decla ed a ge ha he S uc u al Ac ions –exclusi e o he ESF- a e in ended o p omo e Public
In es men in key a eas o g ow h, his pape ies o show ha he e ec i eness o hese policies will
depend on he le el o iscal decen aliza ion o he coun y o egion o applica ion. Being his he
case, he policy implica ion yield by his esul would include aking in o accoun he di e en le els o
iscal ede alism achie ed in he Membe S a es in he ules go e ning he S uc u al Ac ions. The one-
size- i s-all s a egy, ha has gi en easonably good esul s in he pas , may be imp o ed in o de o
2 De ining ax-e iciency as he capaci y ha he subsidized go e nmen has o e icien ly aise axes. One could
hink ha his a iable may be closely linked o he le el o iscal au onomy.
3 Gil-Se a e and López-Labo da (2005) link he causali y in he o he di ec ion, s a ing ha economies wi h a
highe “ lypape e ec ” (expendi u e esponse o an in e go e nmen al g an ) would ha e a lowe op imal le el
o ax-decen aliza ion.
5
se e a la ge and mo e he e ogeneous Eu opean Union in a new scena io in which, mos likely, augh
cons ains in he public budge a e going o emain o yea s a e he c isis is o e come.
Spanish egions a e, p obably, he be e example o he de elopmen on bo h policies o e he pas
ew yea s. Spain ha e, simul aneously, expe ienced an impo an decen aliza ion p ocess as well as
bene i ed g ea ly o he Cohesion Policies un h ough he S uc u al Ac ions. Bo h p ocesses ha e
been asymme ic and independen : asymme ic because while iscal ede alism has a ec ed di e en ly
in ime and deg ee he se e al Spanish egions, he alloca ion o S uc u al Ac ion shows also
impo an di e ences ac oss egions; and independen , because bo h policies a e comple ely un ela ed,
since he e is no economical, social o geog aphical aspec s unning he p ocesses o decen aliza ion.
The e o e, he s onge e ec o he S uc u al Ac ions de o ed o poo e egions a ec , equally, o
egions wi h high o low le el o iscal au onomy.
The pape p oceeds as ollows: Sec ion 2 gi es an o e iew o he main ac s and igu es desc ibing
iscal decen aliza ion and S uc u al Funds in Spain; Sec ion 3 p esen s he heo e ical amewo k ha
will help o in e p e he esul s; Sec ion 4 p esen s he da a and a iables; Sec ion 5 desc ibes he
me hodology and he esul s; and Sec ion 6 concludes.
2. FISCAL DECENTRALIZATION AND REGIONAL POLICY IN SPAIN
In his sec ion, we in oduce some igu es ha show how Spanish egions a e a sui able illus a ion o
he wo policies unde conside a ion ( iscal decen aliza ion and EU cohesion policy), as hey a ec
hese egions wi h a ela i ely la ge deg ee o c oss-sec ional a iabili y.
The ecen p ocess o decen aliza ion o public inancing in Spain s a s wi h he Spanish Cons i u ion
o 1978. The Cons i u ion se he bases o he ul e io es ablishmen o he se en een egional bodies,
de ined as “Au onomous Communi ies”, which a e he main bene icia ies o he decen aliza ion
p ocess. The Cons i u ion s a es ha he le el o compe encies assumed by each egional go e nmen

6
and he pace a which hese compe encies a e assumed is no homogeneous among all egions. The
cons i u ion o he egional go e nmen s inished in 19834.
Figu e [1] abou he e
Simul aneously o he p ocess o poli ical adap a ion o he new Cons i u ion, occu ed he mos
impo an inc ease o public spending. To al public spending mo ed om ep esen ing less han hi y
pe cen o GDP in he la e se en ies o lay a ound i y pe cen in he las yea s. Figu e [1] shows how
he main bene icia y o he decen aliza ion in he las yea s has been he egional sec o . Local public
expendi u e has only inc eased i s sha e o e o al expendi u e wo pe cen age poin s in hi een yea s,
while he egional le el has inc eased o o e 30% o o al public expendi u e in 2008, compa ed o
1995 when i ep esen ed a ound 17 %. Figu e [2] shows ha he p ocess o decen aliza ion ha Spain
has expe ienced is no a gene al pa e n o beha io o he coun ies on i s economic en i onmen .
Figu e [2] abou he e
The Spanish Cons i u ion disc imina es be ween wo ypes o egions: he so-called "his o ic
na ionali ies" o egions wi h a high le el o compe encies5 and he en emaining egions6 (and he wo
au onomous ci ies) ha in p inciple assume a lowe le el o compe encies. In p ac ice, he egions wi h
high le els o compe encies expe ienced a highe le el o iscal au onomy in he beginning, bu he gap
be ween bo h ypes o egions ha e been educed as long as he decen aliza ion p ocess has been
aking place. We can obse e his phenomenon i we build a a io o iscal decen aliza ion as he
coe icien be ween pe capi a expendi u e a he egional le el o he pe capi a expendi u e a he
cen al le el, which is shown in Figu e [3]:
4 Al hough la e , in 1995, we e cons i u ed he S a u es o he wo Au onomous ci ies, Ceu a and Melilla. These
ha e been excluded om ou analysis due o da a a ailabili y.
5 Andalusia, Basque Coun y, Cana y Islands, Ca alonia, Galicia, Na a e and Comunidad Valenciana.
6A agon, As u ias, Balea ic Islands, Can ab ia, Cas ile La-Mancha, Cas ile and Leon, Comunidad de Mad id,
Ex emadu a, Mu cia and La Rioja.
7
Figu e [3] abou he e
A deepe analysis o he unc ional ca ego ies7 e eals ha he ca ego y "Social Public Goods" -using
he nomencla u e o he unc ional classi ica ion used by he Spanish "Minis e io de Economía y
Hacienda"- is he main a ea o decen aliza ion o he egions wi h a low le el o compe encies as well
as he main componen o he public budge . O he unc ional ca ego ies ha ha e expe ienced a
signi ican le el o decen aliza ion ha e been "Social Secu i y and P omo ion", "Economic egula ion
o P oduc i e Sec o s", "Gene al Public Se ices" and "Economic Public Goods"
While he le el o iscal au onomy is almos iden ical among he egions wi h low le el o
compe encies, iscal compe encies among he egions wi h high le el o compe encies is mo e
he e ogeneous8. This is also e lec ed in he dis ibu ion o he e enue-side o he budge shown in
Figu e 4. In pa icula , wo o he egions (Basque Coun y and Na a e) ha e pa icula p i ileges
abou he collec ion o axes in hei e i o y. Spanish egional inancing scheme has gone h ough
se e al e isions o e ime (See Lopez-Labo da, 2006; De la Fuen e, 2010). Fo he ime window
analyzed in his pape , he e ha e been h ee di e en sys ems in o o ce (1991-1996; 1997-2001; and
2002-2008). These e isions ha e es ablished, subsequen ly, a la ge sha e o ax e enues in he
budge o egional go e nmen s as well as la ge leeway o decide on he le el o axa ion, and
no ma i e capaci y o es ablish o abolish ce ain axes. The edis ibu i e mechanism, howe e , has
no been modi ied un il he e ision implemen ed on 2009 (See Bassols e al., 2010) which is ou side
he pe iod unde conside a ion in his pape .
[Figu e 4 abou he e]
Bo h g oups o egions a e no ep esen ing ei he geog aphical concen a ion o economic
cha ac e is ics, meaning ha he e is no o he common denomina o be ween egions wi h high le el o
7 See González-Aleg e (2010)
8 See Mole o (2001)
8
au onomy o be ween egions wi h low le el o au onomy o he han hei poli ical s a us. In bo h
g oups o egions he e a e objec i e 1 egions (which a e eligible o mos o he S uc u al Funds)
and egions wi h pe capi a income la ge han he na ional and Eu opean a e ages. Figu e [5] has he
pu pose o showing ha he e is no sys ema ic di e ence in he amoun o S uc u al Funds om he
EU ha bo h g oups o egions ecei e.
Figu e [5] abou he e
The inc ease in he size egional go e nmen s has also a ec ed he dis ibu ion o public egional
spending among he di e en economic ca ego ies. The egions ha e augmen ed he sha e o cu en
spending, de o ing a mino pa o hei unds o inc easing hei s ock o capi al (Figu e [6]). One
migh hink ha his si ua ion could be induced by a ce ain ealloca ion o compe encies be ween he
cen al and egional go e nmen s. Howe e , he Cen al Go e nmen has no inc eased i s sha e o
capi al expendi u e, bu has, on he con a y, sligh ly dec eased i . The all in he capi al sha e o public
expendi u e is clea ly mo e ele an in he egions wi h low le els o compe encies, which a e also
hose ha ha e unde gone a mo e p o ound p ocess o decen aliza ion.
Figu e [6] abou he e
3. MODELLING FISCAL DECENTRALIZATION
This sec ion shows how heo e ical p edic ions abou he impac o in e go e nmen al g an s on public
adminis a ions gaining iscal au onomy wi hin a ede a ion, depend la gely on he assump ions used o
model iscal au onomy. As men ioned be o e, he exis ence o heo e ical models ha combine iscal
decen aliza ion and in e go e nmen al g an s is ela i ely limi ed.
9
Ne e heless, he li e a u e abou he condi ions ha make iscal decen aliza ion desi able is ex emely
p oli ic9. A gumen s in a ou o iscal decen aliza ion ely la gely on p e e ence he e ogenei y o
public goods p o ision among egions (Besley and Coa e, 2003; B ueckne , 2005; Rubinchick-
Pessach, 2005) and i s impac on mul i ac o p oduc i i y (Ma ínez-Vazquez and McNab, 2006) while
a gumen s agains a e usually based on in e naliza ion o spillo e e ec s among egions (Chu and
Yang, 2012) , s a egic beha iou owa ds edis ibu ion (Oa es, 2005) o iscal compe i ion (Lei e-
Mon ei o and Sa o, 2003; Ha iel and Pad o, 2008).
Fo he sake o his pape , howe e , i is impo an o dis inguish be ween iscal au onomy based on he
capaci y o decide on he dis ibu ion o he public budge –bo h in he expendi u es and he e enues
side o he budge - and iscal au onomy a ec ing he mechanisms o egional edis ibu ion o income.
Based on one o he sub-games10 included in Volden (2007), le us assume a sub-na ional go e nmen
which ac s as a ep esen a i e agen o i s cons i uen s and ha bene i s om p o iding an in es men
good and keeping axes low, so ha :
Us = (yi) c,s – ( s + n) b,s - d - xs
The u ili y o he sub-na ional go e nmen depends posi i ely on income, which is ela ed o he public
in es men good acco ding o he p oduc ion unc ion yi=iqi. The unc ion c,s ep esen s he ac ion
o c edi ha he sub-na ional go e nmen ob ains om he p o ision o he public in es men good; s
and n ep esen axes issued by he sub-na ional and na ional go e nmen s espec i ely, and b,s
ep esen s he ac ion o blame ha he sub-na ional go e nmen ob ains om axa ion. Finally, he
las e m cap u es he disu ili y associa ed om aking a policy di ec ion which de ia es, in a one
dimensional line, om he op imal di ec ion p e e ed by he ep esen a i e agen s.
9 Being Oa es (1972) conside ed as he blas -o ha s imula ed mos subsequen esea ch. An in ui i e e iew o
he e olu ion o he li e a u e may be ound in Weingas (2009)
10 In oducing wo main inno a ions o he model: he conside a ion o a public in es men good ins ead o a
consump ion good an he in oduc ion o a edis ibu i e mechanism among sub-na ional go e nmen s.
16
In o de o es he hypo hesis ha public in es men may be a ec ed by Eu opean S uc u al Funds '
g an s, we ha e cons uc ed a model in which he dependen a iable is Public In es men a he
egional le el o he se en een Spanish egional bodies. The se o explana o y a iables includes ou
main a iable o in e es , EUSF, ep esen he capi al ans e s om he EU o he egional go e nmen
alloca ed o he egion "i" in he cu en yea " ". We ha e also in oduced in he model o he con ol
a iables: p i a e in es men , public consump ion, GDP g ow h, popula ion g ow h, and cen al
go e nmen in es men , included in he ec o x:
i, i, i, ,PubIn = eus + x + i i
   

(1)
Whe e

is he coe icien ha desc ibes he impac o S uc u al Funds on Public In es men and he
main a ge o ou es ima ion;
x
is a ec o , (1x5), o explana o y a iables and

is he se o
pa ame e s, (5x1) associa ed o hese con ol a iables ha mus be es ima ed;
i

is he unobse able
uni -speci ic e ec and
,i

is he unobse able e o e m.
In o de o es ima e equa ion (1), we ha e spli he sample a ending o he le el o iscal au onomy o
he egions. We ha e aken wo al e na i e c i e ia in o conside a ion in o de o conside sub-samples:
i s ly, we ha e classi ied Spanish egions in o wo subg oups acco ding o he le el o iscal au onomy
ha he Spanish Cons i u ion ecognizes hem. The e o e, we c ea e a g oup o wha he Spanish
Cons i u ion conside s16 “His o ic Na ionali ies”, and a second g oup o he emaining en egions17,
o which he Cons i u ions ecognized a lowe le el o Au onomy.
And secondly, as a obus ness check, we ha e also conside ed he ime-dimension o he se ies in o de
o iden i y wo al e na i e subg oups wi h ema kable di e ences in hei le el o iscal au onomy. We
ha e selec ed he yea 2000 as he b eak poin , which will lea e us wo subsamples o simila leng h.
16 Andalusia, Basque Coun y, Cana y Islands, Ca alonia, Galicia, Na a e and Valencian Communi y.
17 A agon, As u ias, Balea ic Islands, Can ab ia, Cas ile and Leon, Cas ile-La Mancha, Ex emadu a Comunidad
de Mad id, Mu cia, La Rioja.

17
The e olu ion o iscal au onomy ac oss ime in bo h subsamples is qui e s able in bo h g oups o
egions18 al hough wi h a ema kable gap be ween egions wi h low and high le el o compe encies.
The use o wo al e na i e c i e ia o di ide he sample will le us o e come some o he sho comings
which a e a ached o each c i e ion. On he one hand, spli ing he sample acco ding o he ole
ecognized in he Cons i u ion may a ise he doub ha we may be accoun ing o a sys ema ic
di e ence be ween bo h g oups o egions ha may no come om he le el o iscal au onomy bu
om an igno ed sou ce19. On he o he hand, b eaking he sample in o wo ime-pe iods may be
in e p e ed as he iden i ica ion o some s uc u al change ac oss ime.
P ima y es ima ions o equa ion (1) sugges he p esence o au oco ela ed e o s. The e o e, he
o iginal model in equa ion has been es ima ed in he p esence o se ially co ela ed e o s20. Ini ially,
we also assume s ic exogenei y o he explana o y a iables (
,,[ , ] 0i s i Ex


; ,s=1,2,...T). This
assump ion may be conside ed oo s ong o ou model. Many esul s21 show ha he alloca ion o
public expendi u e may be endogenous o he alloca ion o g an s. The dis ibu ion o he S uc u al
Funds may be hough o espond o some unobse ed necessi ies and conjunc u e ha simul aneously
d i es decisions on public in es men . We mus admi he possibili y ha some o he explana o y
a iables, in pa icula eus , mus be co ela ed o he e o e m since he p opensi y o inc ease public
in es men may incen i e la ge alloca ion o S uc u al Funds ( hus, making causali y un in he
opposi e di ec ion o he one assumed in he pape ).
The immedia e solu ion o he p oblem could be o ind some ins umen al a iables co ela ed o
s uc u al unds bu o hogonal o public in es men . Al e na i ely, we can use lags o he dependen
and explana o y a iables as ins umen s. The GMM es ima ion me hod de eloped by A ellano and
18 See González-Aleg e (2008)
19 Despi e he ac ha he e a e no ema kable di e ences in he le el o economic de elopmen among bo h
g oups o egions. Nei he he e a e geog aphical, comme cial o cul u al di e ences among hem.
20 P elimina y es ima ions sugges also he use o ixed-e ec s models. The esul s o he andom e ec s
es ima ions, as well as he Hausman es a e omi ed o he sake o b e i y.
21 Knigh , 2002; Becke , 1996; Besley and Case, 2000.
18
Bond (1991) elies on he o hogonali y o he dependen and explana o y a iables wi h he i s
di e ences o he e o componen in lagged pe iods. This me hod allows us o include endogenous
and p ede e mined dependen a iables. These GMM me hods cons uc momen condi ions ha e lec
his o hogonali y, unde assump ion o se ially unco ela ed shocks, e o componen s and
p ede e mined ini ial condi ions22. The p oblem would be, he e o e, ha we ha e p e iously admi ed
he possibili y o he exis ence o AR(1) e o s in he o iginal model, which implies ha lagged alues
o he dependen and explana o y a iables a e co ela ed wi h pas shocks and he momen condi ions
ha should be used23, a e no longe alid in he o iginal model
Fo ha eason, we ans o m he s a ic model in o a dynamic one wi h se ially unco ela ed shocks by
sub ac ing he au oco ela ion e m a ached o he o iginal e o s:
i, i, i, ,PubIn = eus + x + i i
   

whe e
, , ,1i i i e e u

  
i, i, i, i, i, i, ,PubIn = *PubIn + eus - eus + x - x +(1- ) i i u
      

(2)
Equa ion (2) ep esen s a model wi h se ially unco ela ed shocks ha we can es ima e using A ellano
and Bond (1991) GMM es ima o o dynamic panels. The explana o y a iables a e co ela ed wi h
he indi idual e ec s and a e assumed o be endogenous wi h espec o he se ially unco ela ed
shocks.
Es ima ion Resul s. Table 3 shows he esul s o es ima ing equa ions (1) and (2) when we di ide ou
sample acco ding o he le el o au onomy ecognized o he egions in he Spanish Cons i u ion.
Columns [1] o [4] include he es ima ion o he egions wi h a lowe le el o au onomy while
22
,,[ ] [ ] [ ] 0i i i i E E E
   
  
;
,,[ ] 0i s i E


o
s
and
,1 ,[ ] 0i i E PubIn


=2,...T
espec i ely.
23
,,[ ] 0i s i E PubIn


o =3,…T and
2s
;
,,[ ] 0i s i Ex


, o =3,…T and
2s
i a iables
in x a e endogenous
19
columns [5] o [8] include he es ima ions o he emaining se en egions wi h a la ge le el o iscal
au onomy. Columns [1]-[2] and [5]-[8] assume a ixed-e ec s24 model wi h au oco ela ed e o s,
while [3]-[4] and [7]-[8] a e es ima es o equa ion (2) ob aining assuming engogenei y o explana o y
a iables using one-s ep e sion o he GMM es ima o de eloped by A ellano and Bond (1991). In
addi ion, we assume wo se s o con ol a iables, one mo e gene al and one mo e es ained.
Resul s a e qui e homogeneous among models o e e y se o egions. The S uc u al Ac ions (eus )
seem o be a signi ican de e minan o Public In es men in he egions wi h low le el o
compe encies, being he coe icien es ima ed signi ican ly posi i e 0 and smalle han one. Howe e ,
o he egions wi h a high le el o compe encies, he coe icien s es ima ed a e smalle and gene ally
insigni ican ly di e en om ze o.
As o he emaining con ol a iables, he main sou ce o a iabili y be ween bo h da a-se s in he
coe icien a ached o Public Consump ion ha show a beha iou qui e simila o he one desc ibed o
eus . Public consump ion will cap u e he e ec s o he size o he egional adminis a ion. I is
expec ed o inc ease wi h la ge iscal au onomy and, he e o e, induce u he inc eases also in Public
In es men . P i a e in es men is a posi i e de e minan o Public In es men in all cases while he
emaining con ol a iables do no seem o play a key ole.
Ha ing es ima ed a di e en e ec o he S uc u al Ac ions on Public In es men o he wo g oups
o egions, we also make a second es ima ion by spli ing he sample h ough he ime dimension. I we
examine Figu e [3], we can see how he le el o iscal au onomy o bo h g oups o egions has
inc eased o e ime. By spli ing he sample a ound yea 2000, he le el o iscal au onomy emains
ela i ely s able o bo h g oups o egions ac oss ime25, keeping a signi ican di e ence among hem.
The esul s o he equi alen es ima ions a e shown in Table [4]. We ha e es ima ed an impac o he
24 The selec ion o he ixed-e ec s model has been made upon es ima ion o he equi alen andom-e ec s
model and he co esponding Hausman (1979) es . Aco dingly, he au oco ela ed e o s ha e been included
upon es ima ion o p elimina y models.
25 See González-Aleg e (2010)
20
EUSF on Public In es men la ge and signi ican ly posi i e o he pe iod 1993-1999, while he
es ima es o he pe iod 2000-2007 show poo le els o signi icance. Rega ding Public Consump ions,
he di e ences obse ed in he p e ious es ima ion emain bu a e less s ong. The beha io o he
o he con ol a iables emains s able.
In e ac ion Te m
In o de o ake in o accoun o he e ec o he e olu ion Fiscal Decen aliza ion on he ela ionship
be ween he S uc u al Ac ions and Public in es men , we will make use o an In e ac ion e m.
In e ac ion e ms may be added o a model in o de o inco po a e he join e ec o wo a iables on a
dependen a iable, o e and abo e hei sepa a e e ec s. These a e usually added as he c oss-p oduc
o wo independen a iables, ypically placing hem a e he simple "main e ec s".
In his subchap e , we will analyze he in e ac ion o iscal decen aliza ion ( ep esen ed by he
a iable “dec”) and he capi al ans e s ecei ed by egional go e nmen s ( ep esen ed by “eus ”). The
sepa a e e ec o bo h a iables a e expec ed o be posi i e, since an inc ease in he le el o iscal
decen aliza ion (measu ed as he a io o pe capi a egional o e na ional public expendi u es) is
assumed o inc ease he size o egional go e nmen s and, he e o e, inc ease on public expendi u es –
comp essi e o public in es men -. The e ec o he capi al ans e s h ough he S uc u al Ac ions
(eus ) would ollow he a gumen s examined in he p e ious subchap e .
i, (1) i, (2) (3) i, ,PubIn = eus + dec+ eus *dec+ x + i i
     

(3)
The in e ac ion e m would cap u e, he e o e, he join e ec o hese wo a iables. We can see in
able 5 he esul s o es ima ing he model ep esen ed by equa ion (3) o he whole sample. We ha e
expanded ou se o al e na i e con ol a iables, since we expec ed ha he co ela ion be ween
“Public Consump ion” and “dec” migh be p oblema ic. The esul s, howe e , look qui e obus wi h
21
espec o his issue. As o he es ima ion assump ions and me hodology, we ha e ollowed simila
guidelines as ables 3-4.
We ha e es ima ed a nega i e coe icien a ached o he in e ac ion e m in all cases. The le el o
signi icance, howe e , is a iable and seems o depend on he se o con ols. The nega i e coe icien
means ha he join e ec o addi ional decen aliza ion and public in es men becomes weake . I we
assume a ixed le el o decen aliza ion, o example, addi ional EUSF will induce an e ec on Public
in es men equal o he coe icien es ima ed o EUSF plus he coe icien es ima ed o he
in e ac ion e m mul iplied by he alue o decen aliza ion. Gi en ha he coe icien es ima ed o he
in e ac ion e m is nega i e, he e ec o EUSF on public in es men is posi i e, bu dec easing o
la ge decen aliza ion.
C oss-p oduc in e ac ion e ms may be highly co ela ed wi h he co esponding simple independen
a iables in he eg ession equa ion, c ea ing p oblems wi h assessing he ela i e impo ance o main
e ec s and in e ac ion e ec s. Because o his, some imes i may well be desi able o use cen e ed
a iables (whe e one has sub ac ed he mean om each da um). This ans o ma ion o en educes
mul icollinea i y. Fo he sake o obus ness, we ha e also un equi alen es ima ion using a cen e ed
in e ac ion e m and he esul s do no change signi ican ly (see able 6)
Simul aneous Equa ion model
We wan o check he obus ness o ou esul o he in oduc ion o a simul aneous equa ion model
(SEM), in which we cap u e causali y in bo h di ec ions. One could hink ha he wo a iables in
which we ocus ou in e es : eus and public in es men , a e join ly de e mined by a sys em o
equa ions. In ac , he poli ical decision o in es ing is closely ela ed o he poli ical decision o
alloca ing –o making use o - he S uc u al Funds. Also he economic ealiza ion o he paymen s is
closely ela ed, gi en ha bo h a iables a e o en ela ed o common in es men p ojec s. In addi ion,
each one o he a iables may be a de e minan o he o he one. So a we ha e conside ed ha he

22
alloca ion o S uc u al Funds may encou age Public In es men , bu me mus be awa e ha he
p opensi y o in es in he public sec o may also incen i e he alloca ion o S uc u al Funds in a
pa icula egion.
The sys em consis s o wo s uc u al equa ions, one in which he dependen a iable is Public
In es men , while in he o he he capi al ans e s alloca ed h ough he S uc u al Funds. Each o he
equa ions includes one o he a iables as dependen a iable bu also he o he one as an explana o y –
endogenous- a iable. In addi ion o hese, we also include a se o exogenous a iables26:
i, (1) i, (1) (1)i, (1) (1) ,PubIn = eus + x + i i
   

(4)
i, (2) i, (2) (2)i, (2) (2) ,eus = PubIn + x + i i
   

(5)
Whe e
(1) x
and
(2) x
a e wo ec o s, (1xm) and (1xn) espec i ely, o exogenous explana o y
a iables. Bo h ec o s a e no iden ical, bu hey can sha e some a iables.
(1)

and
(2)

a e he se
o pa ame e s, (mx1) and (nx1) espec i ely, associa ed o he exogenous a iables ha mus be
es ima ed.
(1)i

and
(2)i

a e he unobse able uni -speci ic e ec s and
(1) ,i

and
(2) ,i

a e he
unobse able e o e ms.
We es ima e he model abo e ollowing di e en al e na i e es ima ion me hods in o de o check o
he obus ness o he esul s27. Fi s o all, we assume ha he sou ce o endogenei y is p esen h ough
a posi i e co ela ion be ween he endogenous a iables and he e o e m
(1) ,i

. In his se up, he
model may be es ima es assuming Fixed-E ec s h ough wo-s age leas -squa es (FE-2SLS) and
26 One migh be emp ed o hink ha Public Cu en Expendi u es should ake pa o he simul aneous equa ions
model as an endogenous a iable. As Woold idge (2002) desc ibes o an example ela ing hou s de o ed o
c ime wi h hou s de o ed o wo k, he choice o he sha e o he public budge de o ed o cu en expendi u es
and o in es men is he solu ion o he maximiza ion p oblem o he u ili y unc ion o he go e nmen and
depends on exogenous ac o s –like he popula ion, le el o educa ion, p i a e in es men , e c-. O cou se, some
endogenei y may a ise when es ima ing he ela ions among bo h a iables, bu we conside ha his possibili y is
mo e ela ed o an omi ed a iables p oblem –o e en o measu emen e o - a he han o simul anei y. The
case o Public In es men and Capi al T ans e s (EUSF) is di e en since in his case bo h expenses a e acc ued
simul aneously when e e ed o he same in es men p ojec .
27 We use limi ed in o ma ion es ima o s, which means ha e e y equa ion o he sys em is es ima ed a a ime, in
con as o ull-in o ma ion sys ems, in which he es ima o s a e based on he en i e sys ems o equa ions.
23
assuming Random-E ec s h ough he E o -Componen wo-s age leas -squa es es ima o de eloped
by Bal agi (1981)28. Resul s ob ained using his es ima ion s a egy a e p esen ed in able 8.
Al e na i ely, we may assume ha he sou ce o endogenei y comes om he posi i e co ela ion
be ween he idiosync a ic e m and he endogenous a iables. The explana o y a iables a e, hen,
o hogonal o he s uc u al e o s and he exogenous a iables a e, in addi ion, o hogonal o he
idiosync a ic e m,

. I we assume Fixed-E ec s, he model can be es ima ed by OLS a e he
wi hin ans o ma ion, as shown by Co nwell e al. (1992). Fo he cases in which he uni -speci ic
e ec s a e andom, we make use o he Two-s age leas -squa e Hausman and Taylo (1981) p ocedu e
(HT-2SLS) es ima o 29. The me hod o 2SLS is he mos common me hod used o es ima ing
simul aneous-equa ions models, because o hei simplici y and asymp o ic e iciency. In his case, we
include also addi ional a iables on equa ions (6) and (7),
(1) z
and
(2) z
espec i ely, which a e wo
ec o s o ime-in a ian explana o ies, including bo h endogenous and exogenous a iables:
i, (1) i, (1) (1)i, (1) (1)i (1) (1) ,PubIn = eus + x + z + i i
    

(6)
i, (2) i, (2) (2)i, (2) (2)i (2) (2) ,eus = PubIn + x + z + i i
    

(7)
Usually, as we a e no in e es ed in hei e ec , ime-in a ian a iables a e omi ed since hei e ec
may be cap u ed by he idiosync a ic- e m. Howe e , o he HT 2SLS es ima o , hey a e used as
ins umen s o es ima e he sys em, so i may be use ul o include hem. We desc ibe in able 7 he ime
in a ian a iables included in he HT 2SLS eg ession. These a e, basically, de e minan s o he
In es men needs and economic pe o mance a he beginning o he sample and i s selec ion has been
made upon consul a ion o se e al s udies add essing public in es men 30. Resul s upon he assump ion
ha he endogenous a iables a e co ela ed wi h he uni -speci ic e m a e shown in able 9.
28 See Bal agi (2005) o de ails on his es ima o .
29 The e a e al e na i e p ocedu es o he HT, o example he Amemiya and Mc Cu di (1986) o he B eusch e
al. (1989), which make use o addi ional ins umen s bu a he cos o addi ional assump ions abou he
exogenei y o he explana o y a iables and all hei u u e and pas alues. See Co nwell e al. (1992) o a
de ailed desc ip ion o he di e en es ima o s and hei p ope ies.
30 Wi h a pa icula a en ion o Mi ze (2007), since he uses also his simul aneous equa ion es ima o
24
Bo h, ables 8 and 9, show simila esul s wi h espec o mos o he a iables unde conside a ion.
The esul s p e iously obse ed wi h espec o he impac o he S uc u al Funds on Public
in es men a e ein o ced in a e his es ima ion, al hough i mus be s essed ha he op ion in which
we assume ixed-e ec and o hogonali y o he endogenous a iables wi h he e o e m ( able 9)
yields poo signi ican coe icien s. Public In es men , simul aneously, seems o be a key de e minan
o he olume o S uc u al Funds alloca ed o each egion in each pe iod, al hough he coe icien s
a ached o his di ec ion o he causali y a e signi ican ly smalle han hose om equa ion (4) and (6).
Decen aliza ion is a posi i e de e minan o public in es men . This esul was know om he
p e ious es ima ions o he pape and i was also expec ed, since he a iable iscal decen aliza ion is
an indica o o he size o he egional go e nmen 31 and, he e o e, o i s expendi u e powe .
Ne e heless, we ind a signi ican nega i e coe icien when es ima ing he impac o iscal
decen aliza ion on he S uc u al unds (equa ions (5) and (7)). A a i s glance, one migh be emp ed
o hink ha a e inc easing he le el o iscal au onomy o a egion, Public in es men may be sp ead
o e mo e he e ogeneous policy a eas. This expansion may be a ached o compe encies ha a e no
eligible o he S uc u al Funds, educing, he e o e, he possibili y o he go e nmen o main ain he
ela ionship be ween S uc u al Funds and public in es men .
The coe icien es ima ed o he exogenous a iables a e, in gene al, expec ed and consis en ac oss
models. Among hem, he le el o signi icance o “popula ion g ow h” as a nega i e de e minan o
public in es men becomes ele an wi h espec o p e ious subchap e s o his pape .
3131 As well as he a iable “Public Consump ion. In ac , one migh expec a signi ican le el o colinea i y
be ween bo h a iables, which would jus i y he use o he al e na i e models es ima ed, as in oduced be o e.
25
Tables 10 and 11 eplica e he SEM es ima ion a e spli ing he sample in o he g oup o egions wi h
low le el o compe encies and he egions wi h high le el o compe encies. Table 10 p esen s he esul s
assuming ha he sou ce o he endogenei y is he co ela ion o he a iables wi h he uni -speci ic
e ec , while able 11 assumes co ela ion wi h he e o e m. We ha e es ima ed only he educed
e sions o he models assuming bo h, andom and ixed-e ec s. The es ima ions ha e o be aken
cau iously since he numbe o obse a ions is a bi limi ed. In gene al, he coe icien s es ima ed o
he egions wi h low le el o au onomy a e la ge in absolu e alue and le el o signi icance o he
a iables o ou in e es which is in line wi h ou p e ious esul s. Public in es men , as a de e minan
o EUSF is s onge also in he egions wi h low le el o au onomy, while in he egions wi h high
le el o au onomy, EUSF seem o depend e y ew o he p opensi y o he go e nmen o in es .
Finally, also he le el o iscal decen aliza ion as a de e minan o EUSF seems o be mo e –
nega i ely- impo an in egions wi h low le el o au onomy. Tha is somehow an expec ed esul since
hese egions ha e expe ienced he la ge decen aliza ion p ocess and, in any case, con i ms ou
p e ious suspicious ha by gaining iscal au onomy egions ind i mo e di icul o be eligible o
addi ional g an s.
6. CONCLUSIONS
The impac and e iciency o he S uc u al Ac ions ca ied o e by he Eu opean Union in o de o
enhance sus ainable de elopmen in Eu opean Regions may depend o he le el o iscal ede alism o
he Membe S a es. In his pape , we add ess he pa icula case o he S uc u al Ac ions designed o
enhance Public In es men in key a eas o g ow h.
Spain has expe ienced a p ocess o iscal decen aliza ion in he ecen yea s and, simul aneously, has
been ecipien o an impo an sha e o he S uc u al Ac ions. Due o he he e ogeneous le el o
economic de elopmen and also o he di e se poli ical s a us o Spanish egions, bo h policies ha e
a ec ed hese egions in an asymme ic way. These condi ions make Spanish egions he pe ec
32
Woold idge, JM (2002) Econome ic analysis o c oss sec ion and panel da a. MIT p ess,
Camb idge, MA
Zhang, T, Zou, HF (1998) Fiscal decen aliza ion, public spending and economic g ow h in
China. Jou nal o Public Economics 67: 221-240
Appendix.
Table A1. Fiscal Decen aliza ion and Eu opean Cohesion Policy: P e ious Empi ical S udies
wi h Spanish egional da a.

33
Au o /s
(yea )
Main Issue
Da a
co e age
Me hodology
Main Resul s
Al á ez e
al. (2000)
The impac o iscal
decen aliza ion on
he size o he
public sec o
Spanish
public
sec o a he
egional
le el, 1993
Es ima ion o a
model o c oss-
sec ional da a
Fiscal decen aliza ion has a nega i e
impac on he size o he public
sec o
Mole o
(2002)
Public Spending
and Fiscal
Fede alism in
Spain
Spanish
Public
Adminis a
ions, 1988
1998
Desc ip i e
S a is ics
Fiscal decen aliza ion is mo e
ela ed o Public Expendi u e ela ed
o economic in e en ion in egions
wi h low le el o compe encies,
while in egions wi h a high le el o
compe encies is mo e ela ed o
Redis ibu ion.
De la
Fuen e
(2002)
Impac o EU
Cohesion Policy on
Spanish Objec i e 1
Regions
Spanish
Region-
le el da a,
1994-2006
Panel-da a
es ima ion o
g ow h model,
and calib a ion o
he impac .
The EU Funds add one pe cen age
poin o annual ou pu g ow h in and
0.4 pe cen age poin s o employmen
g ow h.
Pa do
Ga cia
(2003)
Eu opean
Cohesion Policy in
Spanish Regions
Spanish
Regions,
1988-1999
Desc ip i e
analysis o he
Communi y
Suppo
F amewo k
The weakes egions ha e imp o ed
hei in as uc u es, bu he e a e
many di e ences abou hei
inno a ion capaci y, knowledge
access, in o ma ion, and he aining
o human esou ces.
Fa ell
(2004)
E ec o Eu opean
Cohesion Policy on
Spanish and I ish
Economies.
Na ional-
le el da a,
1990-2000
Desc ip i e
S a is ics
EUSF p omo ed economic g ow h,
bu mo e e icien ly in I eland. In
Spain, egional dispa i ies ac ually
inc eased. Pa o he explana ion lies
wi h he ins i u ional di e ences and
policy decisions aken in each Public
Adminis a ion.
Sos illa
Ri e o
(2005)
Impac o EUSF on
g ow h and
employmen
Spanish
Objec i e 1
Regions
(1989
2006)
Adap a ion o he
HERMIN model
o he Spanish
egions (demand
and supply
e ec s o he
EUSF).
A e age inc ease o 0.56 pe cen age
poin s in he g ow h a es . A e age
inc ease in pe capi a income o 425
eu os a 1999 p ices. Inc ease o 1.46
pe cen in employmen .
Pe ez
González
and
Can a e o
P ie o
(2006)
Fiscal
decen aliza ion
and Economic
G ow h
Spanish
Regional
Da a,
(1986-
2001)
Panel da a model.
Fixed-E ec s and
Ins umen al
Va iables.
The impac o iscal decen aliza ion
on economic g ow h is insigni ican .
Gil-Se a e
and López-
Labo da
(2005)
Tax-
decen aliza ion
and economic
g ow h
Spanish
na ional
and
egional
da a, 1980-
1997
Calib a ion o
g ow h model
ha accoun s o
ax
decen aliza ion
An inc ease in he le el o ax
decen alisa ion in he Spanish
economy compa ed o he le el
exis ing in he
aken pe iod would esul in
economic g ow h.
Ca ion-i-
Con ibu ion o
Spanish
Panel Da a model
Fo he egions wi h highe le el o
34
Sil es e,
Espasa and
Mo a
(2008)
iscal
decen aliza ion o
economic g ow h
Regional
Da a, 1964-
2000
es ima ed by
GMM
compe encies, iscal decen aliza ion
has posi i e and signi ican e ec s
on economic g ow h, bu iscal
decen aliza ion has nega i e e ec s
on he egions wi h lowe le el o
compe encies.
González-
Aleg e
(2012)
E ec i eness o EU
S uc u al Ac ions;
1993-2005
EU15 and
Spanish
egional
da a
Panel Da a model
es ima ed by
GMM
Public in es men in he membe
coun ies makes up a ound 60% o
he inc ease in EU unds.
Figu es
35
FIGURE 1: Sha es o Public Expendi u e by le el o adminis a ion
Sou ce: Eu os a , Go e nmen Finance S a is ics
FIGURE 2: Ra io o s a e and local public expendi u e o gene al go e nmen expendi u e. 1995
2007.
0
0.1
0.2
0.3
0.4
0.5
0.6
Aus ia F ance Ge many G eece I aly Po ugal Spain UK
1995 1999 2003 2007
Sou ce: Eu os a , Go e nmen Finance S a is ics.
36
FIGURE 3: Decen aliza ion Ra io. Ra io o pe capi a public expendi u e o he egional
go e nmen o he pe capi a public expendi u e o he cen al go e nmen (excluding social
secu i y).
Sou ce: Badespe and “Liquidación del p esupues o de las CC AA”
FIGURE 4: Sou ces o Re enues as pe cen age o GDP
37
FIGURE 5: Capi al ans e s om he EU o he Spanish egional go e nmen s. (% GDP and
Eu o pe capi a)
Sou ce: “Liquidación del p esupues o de las CCAA”
FIGURE 6: Ra io Capi al o To al Expendi u e
Sou ce: “Liquidación del p esupues o de las CCAA”

38
Tables
TABLE 1: Va iables and sou ces o da a
Va iable
Label
De ini ion
Uni s
Sou ce
Public In es men
PubIn
G oss ixed capi al o ma ion in he
Regional Go e nmen
%GDP
Badespe da abase
(Ins i u o de
Es udios Fiscales,
Minis y o
Economy)
EU S uc u al
Funds
EUSF
EU expendi u e execu ed co esponding
o S uc u al unds, by Membe S a e.
%GDP
Liquidación de
P esupues os de
las CC AA,
Minis y o
Economy
Public
Consump ion
PCons
Public Cu en expendi u e in he
Regional Go e nmen
%GDP
Badespe da abase
P i a e In es men
P i In
In es men o angible and in angible
asse s in he p i a e sec o
%GDP
IVIE (Valencian
Ins i u e o
Economic
Resea ch)
Cen al
Go e nmen
In es meng
CGIn
Public in es men om he cen al
go e nmen disagg ega ed a he egional
le el
%GDP
1984-1999 IVIE
2000-2007 PGE
(Gene al Public
Budge )
GDP g ow h
GDPg
Real GDP g ow h
G ow
h a e
INE (Na ional
S a is ical O ice)
Popula ion g ow h
Popg
Popula ion in miles pe sons
G ow
h a e
Eu os a
Fiscal
Decen aliza ion
DEC
Ra io o pe capi al public expendi u e o
he egional go e nmen o pe capi al
public expendi u e o he cen al
go e nmen
Ra io
Badespe da abase
(Eu os a o
popula ion)
TABLE 2: Summa y S a is ics
Va iable
Obs
Mean
S d. De .
Min
Max
PubIn
255
0.0285
0.012
0.0054
0.0586
EUSF
255
0.0054
0.005
0.0000
0.0307
PCons
255
0.1011
0.048
0.0144
0.2213
P i In
255
0.2335
0.043
0.1404
0.3702
CGIn es
255
0.0180
0.010
0.0017
0.0681
GDPg
255
0.0735
0.027
0.0152
0.2088
POPg
255
0.0083
0.010
-0.0046
0.0383
DEC
255
0.5700
0.295
0.1055
1.6255
DEC*EUSF
255
0.0030
0.003
0.0000
0.0164
39
TABLE 3: The impac o S uc u al Ac ions on Regional Public In es men . Regions wi h di e en le els o Au onomy
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
Regions wi h low le el o compe encies (a . 151)
Regions wi h high le el o compe encies (a .143)
F-E
F-E
GMM-AB
GMM-AB
F-E
F-E
GMM-AB
GMM-AB
PubIn ( -1)
0.5081***
0.4679***
0.6888***
0.7257***
0.080
0.077
0.080
0.071
eus
0.5913***
0.5981***
0.6366***
0.5858***
0.0176
0.0092
0.3573*
0.2690
0.143
0.142
0.156
0.152
0.184
0.178
0.217
0.219
PubCons
0.0647***
0.0526**
0.0732**
0.0693***
0.0451
0.0533
0.1075
0.1102*
0.023
0.021
0.028
0.027
0.054
0.048
0.071
0.061
P i In
0.0820***
0.0782***
0.0847***
0.0815***
0.0656***
0.0624***
0.0611***
0.0623***
0.020
0.020
0.025
0.025
0.019
0.018
0.022
0.022
CGIn es
-0.0322
0.0280
-0.1112
-0.0215
0.066
0.074
0.124
0.131
GDPg
-0.0131
-0.0270*
-0.0031
-0.0121
0.012
0.016
0.009
0.013
POPg
-0.1418
-0.1138
0.0235
0.0285
0.120
0.140
0.113
0.112
F es g oup
4.33 (.001)
7.26 (.000)
6.15 (.000)
6.78 (.000)
R2 wi hin
0.321
0.3092
0.152
0.1502
Au oco . Tes
D-W = .7933
D-W = .7951
AB(1) -2.67
(.00)
AB(1) -2.65 (.00)
D-W = .6732
D-W = .5007
AB(1) -1.97
(.04)
AB(1) -1.96 (.04)
B-W = .9651
B-W = .9639
AB(2) 1.18 (.23)
AB(2) 1.38 (.16)
B-W= 1.0279
B-W= .8483
AB(2) 0.76 (.44)
AB(2) 0.17 (.86)
Sa gan es
94.743
97.339
75.742
78.676
s a
0.77
0.75
0.35
0.39
Obs (g oups)
140 (10)
140 (10)
130 (10)
130 (10)
98 (7)
98 (7)
91 (7)
91 (7)
*,**,*** deno e signi icance le els a he 10%, 5% and 1% espec i ely
Ab(o de ) deno es A ellano and Bond (1991) es o au oco ela ion in he e o e m
D-W: modi ied Du bin-Wa son es o au oco ela ed e o s; B-W: Bal agi Wu LBI
40
TABLE 4: The impac o S uc u al Ac ions on Regional Public In es men . Time-E olu ion
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
1993-1999
2000-2007
F-E
F-E
GMM-AB
GMM-AB
F-E
F-E
GMM-AB
GMM-AB
PubIn ( -1)
0.4551***
0.3934***
0.1643
0.0831955
0.108
0.096
0.115
0.107
eus
0.5886***
0.5884***
0.7426***
0.4373**
0.0851
0.1854
0.0316
0.0562522
0.165
0.161
0.237
0.222
0.220
0.215
0.236
0.244
PubCons
0.0929*
0.1021**
0.0907
0.1182*
0.0232
0.0338
0.1027**
0.0947564
0.047
0.044
0.068
0.069
0.035
0.034
0.047
0.037
P i In
0.0669**
0.0705***
0.0467
0.0628*
0.0623**
0.0619**
0.1199***
0.1281358
0.028
0.025
0.037
0.032
0.024
0.024
0.041
0.037
CGIn es
-0.0148
0.1040
-0.1555*
-0.00038
0.130
0.180
0.081
0.123
GDPg
-0.0072
-0.0349***
-0.0051
0.0166
0.008
0.013
0.040
0.048
POPg
0.0167
-0.4982
-0.1063
-0.1841
0.252
0.463
0.120
0.176
F es g oup
3.52 (.000)
3.73 (.000)
9.79 (.000)
14.21 (.000)
R2 wi hin
0.3059
0.2973
0.142
0.0997
Au oco . Tes
D-W = .9509
D-W = .8448
AB(1)-2.26 (.02)
AB(1)-2.04 (.04)
D-W = 1.227
D-W = 1.175
AB(1)-2.20
(.02)
AB(1)-2.38 (.01)
B-W = 1.350
B-W = 1.264
AB(2) -.065
(.94)
AB(2) -.491 (.62)
B-W = 1.553
B-W = 1.491
AB(2) .566 (.57)
AB(2) .851 (.39)
Sa gan es
27.128
31.83
61.767
64.890
s a
0.98
0.74
-0.48
0.16
Obs (g oups)
102 (17)
102 (17)
85 (17)
85 (17)
119 (17)
119 (17)
102 (17)
102 (17)
*,**,*** deno e signi icance le els a he 10%, 5% and 1% espec i ely
Ab(o de ) deno es A ellano and Bond (1991) es o au oco ela ion in he e o e m
D-W: modi ied Du bin-Wa son es o au oco ela ed e o s; B-W: Bal agi Wu LBI
41
TABLE 5: The impac o S uc u al Ac ions on Regional Public In es men . In e ac ion Te m
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
F-E
F-E
F-E
F-E
GMM-AB
GMM-AB
GMM-AB
GMM-AB
PubIn ( -1)
0.5881***
0.5807***
0.5366***
0.5400***
0.05
0.05
0.05
0.05
eus
0.6482***
0.6895***
0.6477***
0.6757***
0.7860***
0.7898***
0.5452**
0.5262**
0.19
0.18
0.19
0.18
0.22
0.20
0.22
0.21
dec
0.0189**
0.0173***
0.0164***
0.0154***
0.0222***
0.0208***
0.0169***
0.0167***
0.004
0.00
0.00
0.00
0.00
0.00
0.00
0.00
dec*eus
-0.5612*
-0.6267*
-0.5269
-0.5732*
-0.7154*
-0.7325**
-0.5390
-0.4977
0.338
0.33
0.33
0.33
0.37
0.34
0.36
0.35
P i In
0.0462***
0.0475***
0.0444***
0.0456***
0.0492***
0.0508***
0.0594***
0.02
0.02
0.01
0.02
0.02
0.02
0.02
PubCons
-0.0198
-0.0134
-0.0169
0.00073
0.0608***
0.03
0.03
0.03
0.03
0.02
CGIn es
-0.0177
-0.0203
0.0432
0.0427
0.05
0.05
0.06
0.06
GDPg
-0.0129*
-0.0119*
-0.0263***
-0.0247***
0.01
0.01
0.01
0.01
POPg
-0.1606*
-0.1629**
-0.1253
-0.1273
0.08
0.08
0.09
0.09
F es g oup
5.93 (.000)
5.76 (.000)
7.80 (.000)
7.54 (.000)
R2 wi hin
0.3014
0.297
0.2743
0.2699
AR Tes
D-W = .654
D-W = .618
D-W = .652
D-W = .612
AB(1) -3.13
(.00)
AB(1)-3.10
(.00)
AB(1)-3.05
(.00)
AB(1)-3.02
(.00)
B-W = .896
B-W = .860
B-W = .902
B-W = .866
AB(2) .858 (.39)
AB(2) .891 (.37)
AB(2) .526 (.59)
AB(2) .519 (.60)
Sa gan es
173.888
174.296
168.892
169.070
s a
0.63
0.65
0.71
0.67
Obs (g oups)
238 (17)
238 (17)
238 (17)
238 (17)
221 (17)
221 (17)
221 (17)
221 (17)
*,**,*** deno e signi icance le els a he 10%, 5% and 1% espec i ely
Ab(o de ) deno es A ellano and Bond (1991) es o au oco ela ion in he e o e m
D-W: modi ied Du bin-Wa son es o au oco ela ed e o s; B-W: Bal agi Wu LBI