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International researchers defend the benefits of fiscal decentralization in culturally diverse countries like Spain

Three leading international experts on fiscal federalism, Michael Smart, Daniel Treisman and Brian Knight, were taking part in the IEB’s Fourth Workshop on Fiscal Federalism, which analysed the economic and political effects of fiscal decentralization. Michael Smart, Daniel Treisman and Brian Knight, three leading international experts on fiscal federalism, claimed that culturally diverse countries like Spain would derive significant benefits from a more advanced system of fiscal decentralization. The three researchers were taking part in the Fourth Workshop on Fiscal Federalism organized by the Barcelona Institute of Economics (IEB), which focused on the economic effects of political and fiscal decentralization.

Michael Smart, Ph.D. (Stanford University) and Professor at the Department of Economics of the University of Toronto, noted that "decentralization in a complex and multicultural country allows different regions to get what they want from their government" and "to have different governments and services." For Dr Smart, "the evidence suggests that decentralized countries record higher growth, probably because local governments are better at designing systems that allow investments to grow rapidly and to mobilize public revenue for infrastructure costs". Dr Smart, a leading expert in the model transfer tax of Canada, also analysed the patterns of fiscal decentralization in Colombia and Germany, adding that "we should look for ways to ensure that the political fight over [decentralization] does not block a sensible reform that can make government better for people."

Brian Knight, Ph.D. (University of Wisconsin) and Professor of Economics and Public Policy at Brown University, agrees that fiscal decentralization can bring multiple benefits especially "if a country is very diverse in terms of language ??and preferences for different types of services, as is the case of Spain." Dr Knight, who has conducted numerous studies on federal tax systems and policies, stated that redistribution between rich and poor regions may itself create inequality, because some regions pay more than they receive from central government expenditure. This situation "can be exacerbated by politics if certain poor regions are either over-represented or have political power in the central government."

Daniel Treisman, Ph.D. (Harvard) and Professor of Political Science at the University of California, said that the economic and political consequences of greater fiscal autonomy for Catalonia "would necessarily be positive." He added that it ultimately it comes down to values, and of how we perceive "the risks we want to run to change things." For Dr Treisman, it is natural that some parts of the state do not want to change the system, but he stressed that "this is political decision that Catalonia should take together with the rest of the state."

The three experts were taking part in the IEB’s Fourth Workshop on Fiscal Federalism, a forum for debate between researchers which analysed the effects of fiscal decentralization on economic performance, accountability, and corruption. The meeting, held on June 30-July 1, was attended by forty top-level researchers and tackled issues such as the economic performance of more fiscally decentralized countries, the relationship between the degree of decentralization and levels of corruption, and the accountability of decentralized governments.

The aim of Fourth Workshop on Fiscal Federalism, the only international forum of its kind held in Spain, was to analyse the effects of fiscal decentralization on the political and economic environment.

Scientific Committee
The scientific committee of the Fourth Workshop on Fiscal Federalism comprised four University of Barcelona/IEB researchers and professors: Alejandro Esteller-Moré, Bosch, Núria Roca, Albert Solé-Ollé, Pilar Navarro-Sorribas, and Professor Eva Mork (IEB & IFAU and Uppsala University).

The IEB carries out research in Applied Economics at the University of Barcelona. The institute has ??organized its Workshop on Fiscal Federalism every two years since 2005. The last meeting, held in 2009, analysed the economic effects of the financing system of sub-central governments.

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