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   December, 2000

Facultad de Economia, 46022 Valencia, Spain  

  Fiscal Flows in Europe: the Redistributive Effects of the EU Budget

Rafael Domenech, Antonio Maudes and Juan Varela

Weltwirtschaftliches Archiv, 136(4), 2000.

In this paper we analyze the redistributive effects among European countries of the EU budget, exploring the relationship between income and fiscal flows, both in per capita terms. As redistribution policies imply transferring income among members to alleviate persistent differences in per capita income levels, they can increase the speed of convergence of beneficiary countries to similar steady states. Using a new data set on EU budget data from 1986 to 1998, we find that the EU budget has a redistributive character, though only on its expenditure side. Of all expenditure categories we do consider, the most redistributive one is the regional fund, followed by the social fund and by the guarantee section of the EAGGF. All of them become increasingly redistributive in time. As far as total budgetary revenues are concerned, they show proportionality with income. When we consider the net financial balance, our analysis allows us to identify three groups of countries, given the treatment they get from the EU budget that cannot be explained by their per capita income levels.

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