{'fraction_non_alphanumeric': 0.026343799893560404, 'fraction_numerical': 0.005055880787653007, 'mean_word_length': 5.7005347593582885, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 1, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
The Politics and Economics of Regional Transfers: Decentralization, Interregional Redistribution and Income Convergence

Should equity be an objective of fiscal policy? Welfare economics answers this question affirmatively. The subjects of fiscal equity could in principle be individuals or groups of people, including those associated with the regions of a given country (e.g., states, provinces, departments). Back in the 1950s, James M. Buchanan argued that if and to the extent that fiscal equity is considered an objective of economic policy, it should ideally be implemented and assessed on an interpersonal basis. The case for interregional fiscal equalization, if any, rested, for Buchanan, on the political infeasibility of implementing a system of taxation and public expenditure designed for achieving fiscal equity among individuals. Interregional fiscal equalization would be a second best policy choice. But whatever their theoretical rationale, the fact remains that many countries, both federal and unitary (e.g., Canada, Italy and Spain), have at some point adopted fiscal policies for counteracting interregional economic disparities. Professor Fabio Padovano’s book, The Politics and Economics of Regional Transfers, is concerned with how the decisions about regional transfers are made and what their economic effects are. In the author’s words, its main research questions are: ‘‘How does interjurisdictional redistribution affect the evolution of [regional] income differentials? Do centralized governments actually redistribute more than centralized ones?’’ (p. 1). Theoretically grounded on the public choice approach, which seeks to apply neoclassical economics to the analysis of political and administrative behavior, the book is intended to focus more on explaining regional transfers and their consequences (positive economics) than on prescribing geographical redistribution policies (welfare economics). Yet, despite the positive economics leaning, its conclusions have a bearing on whether interregional fiscal equalization should be an objective of economic policy. The most striking hypothesis of Padovano’s book is probably that fiscal redistribution from relatively rich to relatively poor regions could end up hindering, rather than favoring, the convergence of income per capita across regions. Interjurisdictional redistribution, as a policy tool, would not be up to the task of reducing regional income disparities. How is this counterintuitive result possible? Regional transfers may initially be distributed by policy makers in a geographically progressive fashion. Beyond this first round of redistribution, such transfers are likely to have, the author rightly points out, second or higher order distributive effects (e.g., consumption out of transfer payments to a regional government). The literature on the subject typically ignores this issue altogether or assumes that the effects of the first and the successive rounds of redistribution go in the same direction. Not so fast, Padovano warns. Second and higher order rounds of redistribution could cancel out, or more than offset, the effects of first round redistribution. The action of market forces, particularly the relocation of labor and capital across jurisdictions in response to the relative differences between preand after tax wages and rates of return resulting from progressive fiscal policies, would do the job. A great challenge for empirical studies attempting to determine the extent of redistribution associated with interjurisdictional transfers is the generally limited availability and quality of regionalized data on taxation and public expenditure. Journal of Comparative Policy Analysis, Vol. 12, Nos. 1–2, 213–216, February–April 2010