Interregional fiscal transfers resulting from central government debt: New insights and consequences for political economy

The political geography of central government debt has hardly been investigated. We propose a method for calculating implicit interregional transfers stemming from debt. apply this to Belgium over the 1970-2016 period. share poorer Francophone in debt-financed spending was persistently larger than its revenue used pay resulting interest bills. opposite holds richer Flanders. Also, primary deficit one particular year leads an bill each following years as long caused by that is not repaid. All above debt-related Flanders 7% Flemish GDP during many years. Interregional may also be large other democracies suffering both high and considerable geographic income disparities. size these turn explain persistence deficits. This because poorer, less densely populated regions such tend overrepresented within governments. strengthens their ability cause recommend more fiscal decentralisation or at least smaller