Regional Studies, one of the leading journals on Regional Science and Regional Economics, has published online “Starting from scratch? A new approach to subnational public finance”, authored by David Bell, Willem Sas and John Houston, researchers from the Scottish research institution Stirling Management School.

The article, edited by Taylor & Francis Group, addresses the issue of intergovernmental transfer arrangements. The authors propose a new formula to re-think how vertical and horizontal transfers are allocated while increasing transparency, fairness and legitimacy of these schemes. In addition, the new formula the paper suggests would contribute to improve the incentives scheme subcentral governments face at the same time they enjoy an increased fiscal and tax autonomy. Flexibility, asymmetry, co-responsibility and participation constraint are some of the elements gathered in this innovative proposal. Finally, the theoretical formulation is accompanied by an empirical simulation exercise applied to the case of the United Kingdom.

Here it is the abstract of the paper, which is available in this link.

“The arrangements for lower level governments to finance public goods are complex. Combinations of grant mechanisms and local taxes are often regarded as unfair, opaque or ineffective, and therefore tend to lack legitimacy. This paper explores the design of a new fiscal framework for regional public finance, building from principles rather than an ad hoc political process. It also considers the possibility that a region may choose to leave the federation or union. To offset this possibility, and within certain bounds, our framework allows subnational jurisdictions to decide unilaterally how much tax autonomy and fiscal responsibility they wish to adopt.”

“Starting from scratch? A new approach to subnational public finance” was presented by one of its authors, Willem Sas,  during the II International Workshop of Intergovernmental Fiscal Relations hosted the 1st of December of 2020 by Instituto Complutense de Estudios Internacionales and Ituna Center for Basque Economic Agreement and Federalism Studies.