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This paper looks at the divergent economic trajectories of Barcelona and Madrid since Spain's transition to democracy. It highlights how Barcelona, the city that was better positioned four decades ago to emerge as the main Spanish economic hub, has lost out to Madrid. We argue that the contrasting trajectories of the two cities have less to do with the pull of Madrid as the capital of Spain, with the development of new infrastructure in the country, or with agglomeration economies, and more with institutional factors. A growing societal divide in Barcelona along economic, social, and identity lines has led to a greater breakdown of trust and to the development of strong groups with limited capacity to bridge with one another than in Madrid. This has entailed the emergence of negative externalities that have limited the economic potential for growth in Barcelona and facilitated the rise of Madrid as the main economic hub within Spain. [ABSTRACT FROM AUTHOR]

Much of the recent worldwide trend towards devolution has been driven by the belief that fiscal decentralisation is likely to have a positive effect on government efficiency and economic growth. It is generally assumed that the transfer of powers and resources to lower tiers of government allows for a better matching of public policies to local needs and thus for a better allocation of resources. These factors, in turn, are expected to lead to an improvement in regional economic performance, if subnational authorities shift resources from current to capital expenditures in search of a better response to local needs. In this paper we test these assumptions empirically by analysing the evolution of subnational expenditure categories and regional growth in Germany, India, Mexico, Spain, and the USA. We find that, contrary to expectations, decentralisation has coincided in the sample countries with a relative increase in current expenditures at the expense of capital expenditures, which has been associated with lower levels of economic growth in countries where devolution has been driven from above (India and Mexico), but not in Spain, where it has been driven from below. We hypothesise that the differences in legitimacy between the central or federal government and subnational governments in top-down and bottom-up processes of devolution may be at the origin of the diverse capacity to deliver greater allocative and productive efficiency and, eventually, greater economic growth by devolved governments. [ABSTRACT FROM AUTHOR]

The southward enlargement of the European Community with the full accession of Spain and Portugal in 1986 and the creation of the Single Market in 1993 have opened up new opportunities for exports to the EU and have intensified competition with Spanish-made products in the rest of the EU. This paper hypothesises that local adjustment to European integration is conditioned by the comparative local advantages (or disadvantages) in human resources, nodality and external economies which can shape local capacity for the achievement of economies of scale in production, technological modernisation, the development of small and medium enterprises (SMEs) and business services. The capacities for these four dynamic processes are articulated through the interaction between the investment decisions of Spanish and foreign-owned firms and the local comparative advantages, and hence influence the capacity of localities to respond to European integration through trade creation and trade diversion. [ABSTRACT FROM AUTHOR]