Publications

This paper develops a model which integrates the foral or cupo system applied to the Basque Country and Navarre, with the common system applied to the other fifteen Spanish autonomous communities. This approach contributes to the understanding of the relationship between foral, non-foral and central jurisdictions, and offers a complete and integrated picture of the whole Spanish system of regional finance. We show that the cupo is nothing more than an indirect form of measuring the equalising transfer between the central government and the corresponding autonomous jurisdiction. If expenditure needs are defined consistently over the whole system, the cupo form per se -the indirect manner of measuring the transfer- is completely neutral. The cause of the economic advantage associated with the cupo is the particular imputation procedure used to measure it, which biases the scales in favour of foral communities. The model can readily be estimated with available empirical data. Regarding the Basque Country, we find that out of a 109.1% observed excess of resources per capita, an excess of 61.1% is justified by differences in responsibilities between this jurisdiction and non-foral communities, leaving an unjustified excess of 29.8%. The model has clear implications for reform: we show that, even respecting the indirect form of measuring it, the cupo can be redefined so that foral communities have access to the same amount of resources per capita as non-foral communities.