The effects of capital grants to subnational governments under fiscal stress: evidence from the Spanish regions

Santiago Lago-Peñas, Alberto Vaquero García, María Cadaval Sampedro and Patricio Sanchez-Fernandez

Applied Economic Analysis, 2025, vol. 33, issue 99, 165-183

Abstract: PurposeThis paper aims to examine the impact of capital grants on the fiscal choices of Spanish regional governments from 1984 to 2021.Design/methodology/approachAfter running a battery of tests to verify the integration order of variables, joint cointegration and causality direction, the authors estimate a series of vector autoregressive models.FindingsThe results show that capital grants were highly effective until 2007, boosting capital expenditure and generating a significant crowding-in effect on capital expenditure in the long run. Then, the authors specifically analyze structural changes due to the deep impact of the Great Recession in Spain since 2008. However, the crowding-in effect still holds. Conditionality and matching rates are relevant elements of a sound definition of grant programs to subcentral governments.Originality/valueThe findings contribute significantly to the existing literature on fiscal federalism and regional economics.

Keywords: Intergovernmental grants; Regional policy; Crowding-out effect; Capital expenditure (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/aea/article/33/99/165/1248 ... rants-to-subnational (text/html)
https://www.emerald.com/aea/article-pdf/33/99/165/ ... a-04-2024-0154en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:aeapps:aea-04-2024-0154

DOI: 10.1108/AEA-04-2024-0154

Access Statistics for this article

Applied Economic Analysis is currently edited by Carmen D??az-Mora and Francisco Requena

More articles in Applied Economic Analysis from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().