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We suspect that the efficiency of intergovernmental grants is related to the level of fiscal autonomy of the subsidized government. In this paper we construct and estimate a panel data model capturing the role of fiscal federalism on the effectiveness of EU structural actions in enhancing public investment. We use data from the 17 Spanish regions for the period 1993-2007. Results unambiguously support the hypothesis that the effectiveness of the structural funds decreases with larger fiscal autonomy, which could reflect the fact that fiscal decentralization in Spain has been focused to larger taxation autonomy without affecting regional income redistribution. [ABSTRACT FROM AUTHOR]

This paper extends the seminal Blanchard and Katz regional labour market model to include interaction effects using a dynamic spatial panel data approach. Three key contributions of this extended model are: ( i) the unrealistic assumption that regions are independent of one another no longer has to be made, ( ii) the magnitude and significance of so-called spillover effects can be empirically assessed, and ( iii) both the temporal and spatial propagation of labour demand shocks can be investigated. Using annual data from 1986-2010 for 112 regions across eight EU countries, both the non-spatial and spatial models are estimated. It is found that the majority of the spillover effects are highly significant. Consistent with economic theory, the impact of a region-specific demand shock is largest in the region where the shock instigates. The shock also propagates to other regions, especially impacting the first and second-order neighbours. [ABSTRACT FROM AUTHOR]