Incentive effects of fiscal federalism: Evidence for France

Figures & data

Figure 1. Incentive effects of fiscal federalism.

Table 1. Variable definition

Definition	Source
Real regional GDP per capita: GDP deflated to the base year 2000, divided by the resident population	INSEE^a
Growth of real GDP per capita: ((GDPpct − GDPpct − 1)/GDPpct)	INSEE
Growth rate in residential population: ((POPt − POPt − 1)/POPt)	INSEE
Aggregated subfederal government investments as share of the GDP: INV/nominal GDP	DGCL^b, Budgets locaux en chiffres
Share of population in any education	EUROSTAT^c
Gini coefficient of personal income	Statistiques locales^d, “revenus fiscaux localisés des ménages” (RFLM)
Number of patent applications at the EPO, divided by resident population	EUROSTAT
Marginal retention rate: subfederal tax revenues for own use/total subfederal tax revenue (recipients and donors)	DGCL, Budgets locaux en chiffres
Received transfers, share of GDP, subfederal received transfers/GDP	DGCL, Budgets locaux en chiffres, INSEE
Net loss (of tax revenue) per capita: (total subfederal tax revenue—subfederal tax revenues kept—subfederal transfers received from other regions)/POPi	DGCL, Budgets locaux en chiffres, INSEE
Donor dummy: equals one if net loss per capita is greater than the median of annual net loss pc distribution	Own calculations
Recipient dummy: equals one if net loss per capita is less than the median of annual net loss per capita distribution	Own calculations
“Poor” 25% quartile dummy: equals one if net loss per capita is less than or equal to the first quartile of annual net loss per capita distribution	Own calculations
“Rich” 25% Quartile Dummy (=75% Quartile Dummy): Equals one if net loss per capita is greater than the forth quartile of annual net loss per capita distribution	Own calculations
Average own tax revenue, other regions, for the ith region: $\left(\sum _{j\ne i}\text{Own}\_{\text{Taxes}}_j/{\text{GDP}}_j\right)/\left(J\right)$	DGCL, Budgets locaux en chiffres, INSEE
Average real growth in neighboring regions, for the ith region with k neighbors: $\left(\sum _{k\ne i}\text{GDP}{\text{growth}}_k\right)/(K)$	INSEE

Notes: “Regions” refer to territories of French regions; “subfederal” spending refers to combined spending by local and departmental governments.

^a INSEE: Institut national de la statistique et des études économiques, www.insee.fr.

^b DGCL: Direction générale des collectivités locales, http://www.dgcl.interieur.gouv.fr/.

^c EUROSTAT: www.epp.eurostat.ec.europa.eu/.

^d Statistiques locales: www.statistiques-locales.insee.fr.

Table 2. Summary statistics, 2002–2008

Variable names	Notation	Mean	Standard deviation	Minimum	Maximum
Real GDP per capita (in 10,000 €)	gdpr_pc	2.237	0.398	1.786	4.052
Growth of real GDP per capita	gdpr_pc_g	0.008	0.014	−0.030	0.082
Received transfers by recipients (share in GDP)	trangdp_rec	0.023	0.028	0.000	0.124
Received transfers by donors (share in GDP)	trangdp_pay	0.016	0.016	0.000	0.041
Marginal retention rate (recipient)	ret2_rec	0.399	0.428	0.000	1.572
Marginal retention rate (donor)	ret2_pay	0.293	0.314	0.000	0.747
Average own tax revenue in other regions (recipient) (share in GDP)	torec	0.023	0.023	0.000	0.049
Average own tax revenue in other regions (donors) (share in GDP)	topay	0.023	0.023	0.000	0.049
Average own tax revenue in 25% poorest regions (recipient) (share in GDP)	torec25	0.012	0.020	0.000	0.049
Average own tax revenue in 25% richest regions (donors) (share in GDP)	topay25	0.012	0.020	0.000	0.049
Gini coefficient	gini	0.371	0.024	0.339	0.445
Population growth	pop_g	0.006	0.005	−0.001	0.018
Number of patents (in 1,000)	patents	0.077	0.063	0.000	0.293
Share of population in educational training	educ2	0.227	0.018	0.175	0.268
Investment (share in GDP)	inv_gdp	0.035	0.009	0.018	0.084
Average real growth in neighboring regions	spa_rgpc	0.008	0.011	−0.017	0.041

Table 3. Fiscal equalization and economic growth in France, 2003–2008

	Model
	1	2	3	4
gdpr_pc(−1)	−0.216^***	−0.289^***	−0.251^***	−0.276^***
	0.042	0.047	0.045	0.045
pop_g	−1.217	−1.034	−0.753	−2.523^*
	1.368	1.341	1.385	1.445
inv_gdp(−1)	2.169^***	2.459^***	2.284^***	1.528^**
	0.617	0.602	0.618	0.671
educ2(−1)	−0.734	1.030	−0.529	0.172
	0.680	0.903	0.706	0.739
gini(−1)	3.174^***	2.265^***	3.375^***	3.071^***
	0.707	0.838	0.723	0.747
patents(−1)	0.171^**	0.150^**	0.121	0.063
	0.073	0.074	0.075	0.078
ret2_rec(−1)		0.018	−0.057^**	−0.065^**
		0.041	0.028	0.029
ret2_pay(−1)		0.015	−0.052^*	−0.060^*
		0.045	0.028	0.035
torec(−1)		6.473^**
		2.518
topay(−1)		6.596^**
		2.559
torec25(−1)			−0.150
			0.164
topay25(−1)			0.147
			0.176
trangdp_rec(−1)				2.281^**
				0.916
trangdp_pay(−1)				2.304^**
				1.059
R^2	0.35	0.42	0.39	0.41

Notes: Dependent variable is the per capita regional GDP growth rate. All models include region-specific fixed effects. Tables report GLS estimates with heteroscedasticity-robust standard errors reported in italics.

^* Significance at 10% level.

^** Significance at 5% level.

^*** Significance at 1% level.

Table 4. Accounting for growth-spillover effects

	Model
	3A	4A	3B	4B	3C	4C
gdpr_pc(−1)	−0.235^***	−0.244^***	−0.210^***	−0.239^***	−0.242^***	−0.254^***
	0.049	0.047	0.038	0.037	0.039	0.039
pop_g	−0.342	−2.018	−0.303	−1.721	−1.166	−1.930
	1.457	1.437	1.138	1.184	1.175	1.190
inv_gdp(−1)	2.297^***	1.316^*	1.685^***	1.052^*	1.561^***	1.123^**
	0.618	0.665	0.514	0.551	0.506	0.552
educ2(−1)	−0.528	0.405	−0.822	−0.295	−0.869	−0.490
	0.707	0.733	0.581	0.607	0.569	0.621
gini(−1)	3.319^***	2.862^***	2.418^***	2.104^***	2.393^***	2.116^***
	0.726	0.739	0.608	0.624	0.596	0.622
patents(−1)	0.125^*	0.049	−0.024	−0.082	−0.056	−0.090
	0.075	0.077	0.065	0.067	0.065	0.067
ret2_rec(−1)	−0.050^*	−0.053^*	−0.052^**	−0.055^**	−0.065^***	−0.061^**
	0.029	0.029	0.023	0.024	0.023	0.024
ret2_pay(−1)	−0.046	−0.045	−0.046^*	−0.066^**	−0.059^**	−0.076^**
	0.029	0.035	0.023	0.028	0.024	0.029
torec25(−1)	−0.130		−0.020		−0.045
	0.165		0.136		0.133
topay25(−1)	0.160		0.188		0.165
	0.177		0.144		0.142
trangdp_rec(−1)		3.146^***		1.931^**		1.371
		0.981		0.749		0.853
trangdp_pay(−1)		3.119^***		2.310^***		1.822^*
		1.103		0.864		0.933
spa_rgpc			0.678^***	0.667^***	0.786^***	0.746^***
			0.096	0.093	0.105	0.109
spa_rgpc(−1)	−0.116	−0.290^**			0.265^**	0.174
	0.128	0.132			0.115	0.129
R^2	0.392	0.442	0.591	0.614	0.612	0.621

Notes: Dependent variable is the per capita regional GDP growth rate. All models include region-specific fixed effects. Tables report GLS estimates with heteroscedasticity-robust standard errors reported in italics.

^* Significance at 10% level.

^** Significance at 5% level.

^*** Significance at 1% level.