Non-Institutional federalism in Spain

Spain has advanced significantly regarding the assignment of responsibilities on public expenditure and tax powers across regional governments. However, regions do not participate significantly in the decentralization process. The lack of federal insitutions in which regions are represented motivates non-cooperative behaviours and fosters competition between all levels of government. The consequence is that the provision of public goods and services is rather inefficient. We illustrate our argument using a very simple model with externalities in which the normative recommendation of decentralization does not guarantee the efficient provision of public goods. The adequate design of federal institutions would allow reducing such inefficiencies. Finally we try to identify the political characteristics of the Spanish regime that may explain the lack of institutional mechanisms of cooperation-coordination between governments. This type of analysis could be easily extended to the present situation in Ital