Redistributive effects of regional transfers: a conceptual framework

This paper presents a conceptual framework to analyse the redistributive impact of transfers in the context of a decentralized economy. The framework is illustrated by means of a numerical example that describes an economy with three regions and two levels of government -the central level and the regional level-. With this set up, the paper analyses a variety of transfer systems and considers its effects on redistribution using as benchmark a centralized version of this economy, in which tax capacity is unevenly distributed across the three regions and central government public expenditure is distributed across regions according to their population.