Edgar Morgenroth
email: edgar.morgenroth@esri.ie

THE REGIONAL DIMENSION OF TAXES AND PUBLIC EXPENDITURE IN IRELAND

Keywords: H72, H77, R11 Regional Disparities, Government Expenditure, Taxes : H72, H77, R11 Die regionale Dimension von Steuern und öffentlichen Ausgaben in Irland vielen anderen Ländern eine anhaltende Debatte über die Art, das Ausmaß und die Entwicklung von regionalen Ungleichgewichten. Über die Auswirkungen der Politik untersucht, nämlich das Fiskalsystem und die öffentlichen Ausgaben. Insbesondere werden regionale Regierungskonten konstruiert, mit denen das Steueraufkommen, die Subventionen und die öffentlichen Ausgaben auf regionaler Ebene identifiziert werden. Die Analyse dieser Daten bestätigt, dass das Fiskalsystem die relativen Einkommensunterschiede in Irland tatsächlich verringert. Darüber hinaus finden zwischen verschiedenen Regionen erhebliche Transfers von Ressourcen statt. JEL Code: H72, H77, R11 Regionale Disparitäten Staatliche Ausgaben Steuern Disparidades regionales Gastos público Impuestos

In Ireland as in many other countries there has been an ongoing debate on the nature, degree and trends of regional imbalance. However, relatively little is known about the effects of policies at the regional level in Ireland. This paper considers two aspects of public policy namely the fiscal system and public expenditure. In particular regional government accounts are constructed, which identify the level of taxation, subsidisation and public expenditure at the regional level. The analysis of this data confirms that the fiscal system does reduce relative income differences in Ireland. Furthermore there are substantial resource transfers across regions.

Introduction

In Ireland there has been an ongoing debate about regional disparities going back at least to the 1950's with the enactment of the Underdeveloped Areas Act in 1952 1 . Despite or perhaps in spite of the recent strong growth performance there is a perception of growing regional disparities. This perception is supported by the data on output measures (see O'Leary, 2001 or Boyle, McCarthy and[START_REF] Boyle | Regional Income Differentials and the Issue of Regional Equalisation in Ireland[END_REF]), but it is not supported by population and labour market trends (see [START_REF]Labour Market Adjustment in the Irish Regions[END_REF]. The debate about the existence and scale of regional disparities has been accompanied by a debate about appropriate regional policies and the appropriate allocation of resources across the regions, which however, has not been matched by rigorous analysis of existing policies. Exceptions to this are a number of papers on the effect of industrial policies and a recent contribution on the effect of a tax incentive scheme. [START_REF] Killen | The Regional Dimension of Industrial Policy and Performance in the Republic of Ireland[END_REF] found that company and job survival rates in the foreign owned sector are higher overall than in the indigenous sector, and that survival rates are generally higher for foreign companies at the periphery and for indigenous companies at the cores. An econometric study found that 27 per cent of the job generation in the designated (lagging) areas over the relevant period could be explicitly linked to regional industrial policy (Meyler and Strobl, 2000). However, according to Barrios, S., H. Gırg and E. Strobl (2006) the policy to disperse industry across all regions, that was pursued in the 1970s was only effective in attracting lowtech firms to the disadvantaged areas. Furthermore, urbanisation economies were a more important locational determinant for high-tech firms than public invectives.

In order to increase economic activity and promote growth in the Upper Shannon Region the Irish government introduced a Rural Renewal Tax Scheme that consisted of special tax breaks in respect to construction developments. Keane (2006) showed that while this scheme reduced unemployment, the costs associated with it were too high for the scheme to pass efficiency tests.

Recently the issue of expenditure across regions has become the focus of debate.

For example the Dublin Chamber of Commerce called for more investment in the Dublin region arguing that, "as a driver of economic growth, innovation and employment for the whole island, the needs of the Greater Dublin Area must be prioritised" (Dublin Chamber of Commerce, 2007). On the other hand residents of the less developed regions feel that they are not receiving enough attention particularly in relation to public investment. For example Senator Margaret Cox resigned from the largest government party (Fianna Fail) in early April 2007 because "failure of this Government to spend all the money we promised to invest, and to deliver the projects we committed to, is adversely impacting the daily life of people living in the West" 2 . This latter view is at least partially driven by the experience with the last National Development Plan (NDP) 2000-2006, for which however data was only available for the two NUTS 2 regions. [START_REF] Gerald | The Mid-Term Evaluation of the National Development Plan (NDP) and Community Support Framework (CSF) for Ireland, 2000-2006[END_REF] showed in their Mid-Term Evaluation (MTE) of the 2000-2006 NDP, that for all spending areas the Southern and Eastern Region was to receive a substantially larger allocation of resources than the Border, Midlands and Western (BMW) region, which of course reflects the different relative size of the regions in terms of population. In per capita terms, however, expenditure in the BMW region was planned to exceed that of the Southern and Eastern region, although the relative allocations within Operational Programmes vary in some cases. When it came to the actual progress the MTE showed that these differences were magnified in the outturn with expenditure significantly lower in the BMW region. While this debate has been ongoing, little is known about the extent and effect of the fiscal system and government expenditure on regional disparities. Thus, the disparities might well be worse if current policies were not in place.

As [START_REF] Bradley | Celtic Cubs? Regional Manufacturing in Ireland[END_REF] note, the fact that the regional disparities in income are smaller than those in output may be due to the redistributive effect of the fiscal system. However, they did not carry out any analysis to back up this assertion.

Since regional government accounts are not available for Ireland, which contrasts with the situation in many other countries, such an analysis is not straightforward.

Internationally, fiscal transfers and the distribution of government expenditure at the regional level have been a subject to substantial analysis and debate. For example in the case of the UK the Barnett formula, which is used to distribute resources across regions has been subject to substantial criticism (see McLean and McMillan, 2003). MacKay (2001) showed that total government expenditure exceeds what is expected in four regions namely London, South East, Scotland and Northern Ireland. However, [START_REF] Gripaios | Regional Spending: A Comment on[END_REF] argued that some of this is related to defence expenditure, which has been particularly high in Northern Ireland due to the 'Troubles' and show that once one accounts for defence, expenditure is disproportional in London, the South East and the South West. A recent analysis by [START_REF] Gripaios | Government Output and Expenditure in UK Regions and Sub-regions: An Analysis of the New Experimental Accounts Data[END_REF] using new UK data analysed public spending at the regional and sub-regional level. This study showed that spending was higher in London, that there is no relationship between the levels of per capita public expenditure and per capita GDP in the UK and that government spending does little to alleviate regional inequalities in the UK. Likewise there has been a debate in Germany [START_REF] Berthold | Die fıderale Ordnung in Deutschland -Motor oder Bremse des wirtschaftlichen Wachstums[END_REF], Canada [START_REF] Rodriguez | The Role of the Interprovincial Transfers in the β-Convergence Process: Further Empirical Evidence for Canada[END_REF] and Portugal [START_REF] Ramos | The Regional Accounts of the General Government: An Application to Portugal[END_REF]. showed that London makes a substantial net contribution the UK exchequer, implying that revenue collected in London is redistributed to other regions in the UK.

Despite the ongoing debate a robust analysis of these issues has not been possible in Ireland due to the lack of data. It is the purpose of this paper to construct a consistent dataset and analyse this with a view to identifying the level of cross regional transfers. As such it directly addresses some of the topics of the recent debate.

This paper is organised as follows. The next section provides a brief outline of the fiscal relations across counties, regions and central government. This is followed by an analysis of the impact of taxes and transfer on average income in each county. As this only covers a small part of the fiscal system, regional government accounts are constructed using existing data in conjunction with a number of strong assumptions.

This data is then used to identify cross regional transfers.

A Brief Guide to the Irish Regions

There are eight NUTS 3 region, and these make up two NUTS 2 regions, namely the Border, Midlands and West region and the Southern and Eastern region.

Table 1 illustrates some of the key characteristics in terms of size and economic development for the most recent years for which data is available. Firstly the table shows that the regions differ quite significantly in terms of size their populations and territory. While Dublin contains a population, which is almost five times the size of the population of the Midlands region it covers the smallest territory.

The table also shows the relative position for index of per capita Gross Value Added (GVA), which is expressed as a percentage of the national average. This shows that there is a significant gap (67%) between the region with the highest GVA (Dublin) and that with the lowest (Midlands). What the table hides is that the dispersion of relative output measures has increased over time and once one amalgamates the Dublin and Mid-East regions which together form a functional region the gap has also increased substantially. As output variables are susceptible to biases due to commuting patterns and transfer pricing by multinational firms, it is also useful to consider an indicator of personal income. Immediately apparent is that gap between the 'richest' and 'poorest' region is substantially smaller at just 23.5%.

Finally, turning to labour market statistics the table shows the low rate of unemployment in Ireland as well as the relatively small regional variation.

Furthermore the implied dependency rates of between 1 and 1.28 dependents per worker are also small with a relatively small gap.

{INSERT TABLE 1 HERE}

The Structure of Fiscal Transfers in Ireland

Before we turn to the effect of the fiscal system on regional income differences and the degree of redistribution across regions it is useful to review the nature of local, regional and national government expenditure at the regional level 3 .

As highlighted in Morgenroth (1999) Ireland has a very centralised government structure. Regional governance is very weak even though two layers of regional government exist, namely the Regional Assemblies (NUTS 2) and the Regional Authorities (NUTS 3). The regional Assemblies are however the managing authorities for the regional operational programmes of the National Development Plan (NDP) which includes the EU structural funds. Apart from this they along with the Regional Authorities are responsible for the production of regional development plans and the promotion of co-ordination among the local authorities and town councils. These have a number of functions social housing, water supply, sewerage, refuse, pollution, recreation, fire protection, roads (other than national) and planning. These roles involve the supply of local public goods such as fire protection, the supply of congestable public goods such as roads and the supply club goods such as recreation.

This centralised structure also implies that expenditure is highly centralised. Thus the regional assemblies (NUTS2) and regional authorities (NUTS3) have no taxraising powers, while local authorities have very limited tax-raising powers. There is no system of regional equalisation payments. Instead the Central Government gives grants to the local authorities. General taxes and subsidies (with the exception of commercial rates and user charges) are uniform throughout the State and thus these are not aimed to directly influence regional development.

The local authorities can raise revenue through commercial property rates. Furthermore, they receive all the vehicle registration taxes for vehicles registered in their local authority area. These are paid into the so-called General Fund, which is topped up by central government. In addition to this the central government gives State Grants to local authorities. Figure 1 shows the importance of the different revue streams. Most noticeable is the very high importance of grants from central government, which on average was 76% of total current revenue. Interestingly this share has been increasing over recent years so that the dependence of local authorities on central government is increasing. Thus, rather than becoming less dependent on central government, through charges for services provided, local authorities are actually becoming more dependent on central government. The miscellaneous category, which includes receipts from the provision of goods and services, increased in importance over the 1980's but has been declining over the 1990's. This might suggests that in fact the privatisation of services is reducing the importance of independent revenue streams for local authorities. Capital revenue (not shown here) is also dominated by transfers from central government, which account for about 65% of capital receipts. Overall, just 8.9 percent of revenues to local and central government are collected by local authorities, while these are responsible for 40 per cent of total expenditure of local and central government.

{INSERT FIGURE 1 HERE}

The impact of taxes and transfers on incomes

As mentioned above [START_REF] Bradley | Celtic Cubs? Regional Manufacturing in Ireland[END_REF] pointed to the fact that the functioning of the welfare and tax system through their redistributive functions might be responsible for reducing the gap in incomes as compared to the gap between output measures across regions. While this requires a substantial amount of analysis, it turns out that it is relatively straightforward to identify the impact of transfers and taxes on incomes. This comparison is facilitated by the detailed breakdown of sources of income and taxes available in the published data available from the Central Statistics Office (CSO) as part of the County Incomes and Regional GDP statistical releases. This data is available at the county level, which identifies incomes in 27 counties.

Figure 2 shows the gap between the county with the lowest per capita income and that with the highest per capita income using three different measures. These measures are income net of subsidies, total income and total income net of taxes (disposable income). The figure clearly shows that the gap is significantly lower once subsidies and taxes are taken into account proving that the operation of the tax and welfare 11 system in Ireland does indeed reduce differences. Interestingly the gap increased for all measures until 2002 but the increase is particularly marked for income net of subsidies. Again the differences show the effect of the fiscal system in reducing differences.

{INSERT FIGURE 2 HERE}

In addition to the comparison of the level of gap between the counties with the lowest and highest incomes it is also interesting to consider the differences in each income measure for individual counties. Figure 3 provides such a comparison for the five counties with the lowest income and the five counties with the highest income.

This graph clearly shows that the impact of the fiscal system improves the relative income of the poorer counties while disimproving the relative position of the richer counties.

{INSERT FIGURE 3 HERE}

Construction of Regional Government Accounts

Of course personal taxes on personal income and personal subsidies are not the only fiscal transfers that take place, since government also provides services and invests in the regions. Consequently it is also useful to consider how wider government expenditure and taxes are distributed across regions. This analysis can however not readily be carried out since data on such flows is not published in a readily usable form, rather the data needs to be assembled into one comparable In particular some published data does not correspond to national accounts totals. For example total tax revenue for the state (local and central government) was €44.3 billion in 2004 while the figures from the regional accounts and county incomes add to only €37.6 billion, a difference of €6.7 billion. Furthermore, the Regional Accounts do not contain information on all major government activities such as public investment and expenditure on health and education. We therefore aim to produce a consistent set of regional government accounts that correspond to the national accounts total for the whole economy.

Given that only certain data series are available at the regional level it is not possible to construct accounts that are as comprehensive as those available at the national level. However, using the data in conjunction with some strong assumptions it is possible to produce regional government accounts that contain the main components. For this purpose it is useful to first split the government accounts into a revenue (largely taxation) and expenditure side.

Within revenue and expenditure we can identify a number of subheadings for which we aim to construct data. For revenue these are taxes, transfers from abroad and other revenues. Taxes are further subdivided into household taxes, product taxes and other taxes. Since these do not add to the total taxes identified a further category of remaining taxes, which is constructed by apportioning the unaccounted remainder of taxes according to the regional shares of recorded taxes. Other revenues, which include investment income, rental income, loan repayments and borrowing and transfers from abroad, are distributed across the regions according to population shares. In total these latter categories of revenue account for about 14% of total revenues and clearly using population shares to attribute these revenues results in more even revenue generation across regions. However, it appears reasonable for example to attribute the investment income and loan repayments (18% of other revenues), which derives from investment in public corporations and investments by the Central Bank of Ireland on a per capita basis. Likewise borrowing (16% of other revenues) is naturally distributed across the population. Thus, while this might introduce a bias into the analysis it is likely that the bias is negligible.

These calculations yield the following table for 2004 (Table 2) where the first three rows are taken directly from the County Incomes and Regional GDP statistical release and the remaining data at the county level being constructed as outlined. In the table the row totals for total tax revenue, transfers from abroad and other revenues match the corresponding entries in the National Income and Expenditure (NIE) accounts.

{INSERT TABLE 2 HERE}

As with taxes, some published data of transfers at the regional level are available from the County Incomes and Regional GDP, but again they do not add to the total in the NIE tables. In some years this case the total slightly exceeds that from the NIE so instead of adding a small amount is subtracted to align the data with NIE. As before the differences are attributed on the basis of the regional shares of recorded subsidies.

The wage bill, which forms part of expenditure on goods and services, is calculated using the employment numbers from the Quarterly National Household Survey (QNHS) and the average wage (obtained from the ESRI Macroeconomic database 4 ). For this calculation the data is disaggregated into health and education and public administration and defence. The wage bill does not cover other current expenditure, which is covered in NIE (e.g. stationery etc.). This is allocated according to the shares of public workers in the regions. Thus the total expenditure on goods and services is derived. Clearly this approach assumes that the mix of grades within the public service is equal across regions and it assumes that there is only limited commuting across regions, neither of which may hold in practice. However, alternative approaches are not readily available. At least in relation to commuting it is possible to consider the likely impact, and once one amalgamates the Dublin and Mid-East regions between which substantial commuting flows take place, a relatively modest level of commuting across regions is observed. Based on calculation using the 2002 Census of Population Commuting Micro-data, other than the Mid-East for which net commuting outflows account for about 32% of workers and Dublin where the net inflow is about 16% only the Midlands region which has a net outflow of about 10% no other region records substantial cross regional commuting. This leaves just two items, namely other expenditure, which includes loan repayment and redemption of securities etc. and Gross Physical Capital Formation.

Other expenditure is simply allocated to the regions according to population shares, while it is possible to apportion the GPCF more precisely using the data from the Construction Industry Review and Outlook 5 . This is used to derive the shares for each type of investment, which goes to each region and using this, the total GFCF is derived. In many cases the total investments in the NIE are very similar to those in the Construction Industry Review and Outlook so the resulting regional totals should be quite robust.

{INSERT TABLE 3 HERE}

Analysis

Having constructed regional accounts in the manner outlined above it is possible to analyse trends in the various indicators 6 . Firstly we consider the trends in real per has increased over time, which implies that the gap between resource inflows and outflows has increased. This suggests that the Irish fiscal system despite not having explicit equalisation rules acts to reduce regional disparities. This is supported by correlation coefficients for the correlation between the implied transfer of resources and real per capita gross value added (GVA) which are negative and range from 0.86 (1996) to 0.99 (2003) and are all statistically significant (see Table 4). Not surprisingly, the table also shows that revenue is highly correlated to GVA. However, while expenditure is also positively correlated with GVA this correlation is smaller than that for revenue, declining over time and not statistically significant for more recent years. Overall these results correspond to those found by Gordon et.al (2004) in that the capital city makes a net contribution to the exchequer, which is redistributed to other regions. Furthermore, the results suggest that the fiscal system does ameliorate regional disparities, which corresponds with that of MacKay (2003) who showed that poorer regions in the UK receive transfers. Overall, Dublin and the South-West region contribute substantially to regional transfers. For example in 2004 just over €2,000 per person were transferred across regions while in the same year the Midlands region received a transfer of just over €3000 per person. In absolute terms the level of transfers is also substantial. In 2004 just over €3 billion were transferred from the 'net surplus regions' Dublin, South-West and Mid-West to the other regions 7 . Overall the tax burden (including social contributions) averages at €11,000 per person in 2004 with a high for Dublin with almost €14,000 per person and a low of €8,500 per person in the Midlands.

{INSERT TABLE 4 HERE}

Another interesting fact emerges when one considers the distribution of both total revenue and total expenditure across regions. While there is a transfer of resources largely from Dublin and the South-West to other regions, which implies that these two regions account for a larger per capita revenue, expenditure in these regions is also above average but not to the same degree as revenue. For example over the period 1995 to 2004 Dublin accounted for 28.9% of the population, 35% of revenue and 31.4% of expenditure. The Midlands, which accounted for just 5.7% of the population and 4.6% of revenue accounted for 5.5% of public expenditure. Thus while being redistributive the fiscal system does not appear to unduly disadvantage the better off regions.

Given that the debate has been concentrating on expenditures and particularly investment it is particularly interesting to consider trends in real per capita public investment. As figure 5 clearly shows that in real terms the level of investment has increased substantially in all regions. However, the Dublin region received a disproportionate share of investment with the level of disproportionality increasing over time. It should however, be noted that given the population of Dublin, in per capita terms Dublin is not favoured when it comes to capital expenditure. Indeed no clear pattern of 'excess' per capita capital expenditure can be detected in the data.

{INSERT FIGURE 5 HERE}

It is also possible to conduct some simple policy evaluation using the constructed data. An interesting example is the so-called 'decentralisation' of 10,235 public sector 8,9 . It should be noted here that the Irish 'decentralisation' does not involve the transfer of government functions to the regional or local level, rather it refers to the relocation of central government jobs outside of the capital city, Dublin.

The planned relocation of jobs would, if implemented entirely in 2004, have led to a relocation of 32% of public administration and defence jobs that existed in Dublin in 2004 away from Dublin 10 . The scheme to relocate public servants to towns and cities outside of Dublin was justified by the government as a measure to help promote more balanced regional growth.

It is possible to assess this rationale in terms of the impact on government spending using the assumptions outlined above. These calculations show that 'decentralisation' increases public expenditure in all regions except Dublin, with these increases ranging from 1.2% in the West to 3.9% in the Midlands Regions, while Dublin would have experienced a decline in public expenditure of 4.9% 11 .

Unfortunately, it is not straightforward to identify the impact of 'decentralisation' on regional taxation as it is difficult to assess the degree of leakage of income out of the regions (e.g. through shopping in another region, cross regional commuting etc.) so it is not possible to identify the impact of decentralisation on overall public expenditure balances. However, as revenue collected directly from the civil and public servants will be a fraction of their total income (wage bill) the overall impact is likely to further reduce imbalances. Of course the proposed decentralisation scheme was to be implemented over a number of years and indeed the pace of implementation has been slow so that the overall impact of the scheme to date has been very limited 12 .

Conclusions

This paper attempts to bring some factual basis to the ongoing debate on regional government expenditure. As such it first considers the degree to which taxes and subsidies at the household level reduce the relative differences in average incomes across counties. That analysis confirms that the fiscal system does reduce relative income differences in Ireland. Since household taxes and subsidies are only a small component of the fiscal system and since the bulk of central and local government revenue is collected at the central level the paper also attempts an analysis of a wider set of regional government accounts, which given that such accounts are not readily available, are constructed in a consistent basis. This requires some strong assumptions, and clearly the estimates derived are dependent on the validity of these assumptions.

The data show some interesting results. Dublin and the South-West contribute to a substantial resource transfer to other regions. The level of transfers is found to be highly related to the state of development. In other words the fiscal system works in a progressive manner in relation to regional disparities 13 . Nevertheless the better off regions receive an above average level of expenditure so that the system only partially equalises. This is particularly pronounced in relation to public gross fixed capital formation, where Dublin gets a significantly larger share in per capita terms than other regions. The result that the tax and expenditure system is progressive across regions stands in contrast with the finding that in Ireland this system has only moderate redistributive qualities across individuals (see Nolan and Smeeding, 2005).

The debate about regional expenditure is implicitly a debate about the trade off between equity and efficiency. Thus poorer regions would argue that that they deserve a 'fair share' of the nation's wealth, while richer regions would argue that this wealth could only be created if there is sufficient investment in their regions. In as much as the analysis presented here can address this debate, the results would suggest that the Irish fiscal system does provide a mechanism to achieve more equity, while at the same time preserving a higher level of expenditure in the wealth generating regions.

The finding that the system provides a significant degree of regional equity is largely the result of the centralised nature of revenue collection in conjunction with the aim to provide similar levels of service across the full range of government activities in all regions. In order to achieve a similar level of equity with a less centralised system would require a more sophisticated system of fiscal equalisation payments across regions. Thus, while many have argued that the Irish system is too centralised (see Morgenroth, 2000) this centrality turns out to be an asset in terms of achieving regional equity.

The conclusion that the system is indeed equitable is based on per capita levels of revenue and expenditure rather than an assessment of needs. However, while this issue was raised in the early 1990s (e.g. [START_REF] Ridge | Local Government Finance and Equalisation: The Case of Ireland[END_REF][START_REF] Ridge | Local Government Finance and Equalisation: The Case of Ireland[END_REF][START_REF] Ridge | Rate Support Grant Distribution in Ireland[END_REF] since the year 2000 the level of transfers from Central to Local government through the General Purpose Local Authority Fund, which accounts for approximately 20 per cent of Local Authority revenue, has been allocated according to a needs and resource model which seeks to account for different needs (see [START_REF] Indecon | Review of Local Government Financing[END_REF].

Whether the levels of transfers provide an optimal balance between equity and efficiency cannot be determined with the analysis provided here. However, at least some researchers have commented on an excessive bias towards equity. For example O'Leary (2002) argued that regional equity considerations might undermine efforts to increase productivity growth, which will be the main driver of future prosperity. In this respect it is noteworthy that public investment accounts for a relatively small Given the experience in other less developed regions of Europe such as the Italian Mezzogiorno, which despite being the destination of substantial transfers have not converged, the analysis provided here points in favour of the arguments put forward by [START_REF]Sources of Regional Divergence in the Celtic Tiger: Policy Responses[END_REF].

An important point to note is that the analysis could not account for regional price differences, which might well reduce real disparities since the price level in more urbanised regions tends to exceed that of poorer more rural regions. Thus the level of subsidisation may actually be understated. Furthermore, this paper has only considered levels of expenditure and revenues, which may mask differences in the cost of providing public services. For example, the costs of providing utilities such as electricity and telecommunications, which are provided to broadly the same standards throughout the country, is higher in rural areas. Thus, since some services are cheaper to provide in more densely populated areas and may be subject to scale effects the richer more urban areas may require a lower expenditure to provide an equal service.

On the other hand more urbanised regions may face higher costs for example in the provision of public housing. Consequently the degree to which differential costs of providing public services across regions affects cross regional redistribution would need to be assessed through further research.

Notes

1. See [START_REF] Bannon | Evolution of Regional Policy in Ireland[END_REF], [START_REF] Killen | The Regional Dimension of Industrial Policy and Performance in the Republic of Ireland[END_REF][START_REF] Gerald | The Mid-Term Evaluation of the National Development Plan (NDP) and Community Support Framework (CSF) for Ireland, 2000-2006[END_REF], 2008) for a review of the evolution of regional policy in Ireland. 3. This issue has been dealt with in a number of studies such as Foundation for Fiscal [START_REF] Studies | Financing of Local Government[END_REF][START_REF] Advisory | Local Government Reorganisation and Reform[END_REF] and [START_REF] Indecon | Review of Local Government Financing[END_REF].

4. http://www.esri.ie/irish_economy/databank/ 5. The author would like to thank Annette Hughes of DKM Economic Consultants for help with Construction Industry Review and Outlook data.

6. A summary of the major tax and expenditure categories for all regions over the period 1995 to 2004 is provided in Table A1.

7. Since the per capita comparison may mask differences in dependency rates, the implied transfer per worker was also calculated but this yielded the identical pattern to that shown in Figure 4 (correlation coefficient of no less than 0.99).

8. These include jobs in government departments and public agencies. 9. Another important example would be the impact of the EU Structural Funds. However, as Fitz [START_REF] Gerald | The Mid-Term Evaluation of the National Development Plan (NDP) and Community Support Framework (CSF) for Ireland, 2000-2006[END_REF] 11. Not all jobs identified for 'decentralisation' had an alternative location identified in the Budget (13%). For the calculations these were allocated across the regions according to their 'decentralisation share'.

12. By the end of June 2007 decentralising organisations had established a presence in over 20 new locations with over 1,000 staff in place. 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

€

Incomesubsidies

Total Income

Disposable income

Source: Own calculations using CSO County Incomes and Regional GDP various issues. Page 37 of 37 http://mc.manuscriptcentral.com/cres Email: regional.studies@fm.ru.nl

F

Regional Studies

  , that is the per capita excess of expenditure over revenue, which is shown in Figure4. The figure clearly shows that the level of redistribution

  was announced by the Irish Minister of Finance, Charlie McCreevey, as part of Budget 2004

  expenditure and as there is no clear pattern of 'excess' capital expenditure in the less developed regions, it appears that the bulk of the redistribution does not tackle any structural deficiencies in those less developed regions.

  http://www.margaretcox.com/ for more details.

  note in their Mid-Term Evaluation of the 2000-2006 National Development Plan, financial data on the expenditures under the Structural Funds in Ireland are not published at the NUTS 3 level. Thus, the impact of including balanced regional development as an objective of the National Development Plan cannot be assessed easily. 10. Dublin accounted for about 35% of all public administration and defence jobs in 2004 (31,825).

  the lack of detailed data it is not possible to consider whether the contrasting result compared to the UK is due to discretionary or non-discretionary spending.

Figure 2 .

 2 Figure 2. Gap between the 'richest' and 'poorest' counties in different income indicators accounting for fiscal impacts.

  Figure 5. Real per capita Public Gross Fixed Capital Formation, (2004 prices)

  [START_REF] Stockdale | London's Place in the UK Economy[END_REF]

	F o r
	P
	e
	e r
	R
	e
	v i e
	w
	O n l
	y

Table 1 .

 1 Summary Statistics on Key Variables on Regional Development Figure 1. Sources of Local Authority Current Revenue (% of Total Current Revenue)

		Population	Area	Per Capita Gross	Per Capita Income	Unemployment	Persons at Work
			(km 2 )	Value Added	(% of National)	Rate	(1000s)
				(% of National)
		(2006)		(2004)	(2004)	(2006Q2)	(2006Q2)
	Border	468,375	1,234.6	74.3	91.6	5.0	205.2
	Midlands	251,664	662.5	66.3	91.4	4.0	115.2
	West	414,277	1,428.7	74.8	93.8	4.2	195.5
	Dublin	1,187,176	92.1	133.3	113.0	4.8	595.4
	Mid-East	475,360	606.134	73.8	98.9	3.3	225.6
	Mid-West	361,028	824.9	93.2	100.5	3.9	174.2
	South-East	460,838	945.2	81.6	89.5	5.0	213.6
	South-West	621,130	1,224.2	122.3	97.4	3.7	292.3
	State	4,239,848	7,018.2	100.0	100.0	4.3	2017.0
	Source: CSO Census of Population, CSO County Incomes and Regional GDP,
	Quarterly National Household Survey.

Source: CSO National Income and Expenditure, various issues.

Table 2 .

 2 Regional Revenues for 2004 (€ million).

	Figure 3. Relative Index of various income measures for the 'poorest' and 'richest' 5
	counties (State=100%), 2004
	120%
	110%
	100%			Income -
	90%			subsidies Total Income
	80%			Disposable
	60% 70%	r o		Income
	P L o n g f o r d e x f o r d o n e g a l D W K i l k e n n y C a r l o w	L o u t h	C o r k L i m e r i c k K i l d a r e D u b l i n
	e r Source: Own calculations using CSO County Incomes and Regional GDP various e issues.
			R
				e
				v i e
				w
				O n l
				y
				29

Midlands West Dublin Mid-East Mid-West South-East South-West State

	household taxes	1,762	933 1,547 5,997	1,980	1,555	1,607	2,574 17,955
	Other taxes	135	57	99	540	89	91	133	218 1,362
	product taxes	1,502	709 1,332 6,884	1,456	1,454	1,621	3,295 18,253
	Tax revenue	3,399	1,699 2,978 13,421	3,525	3,100	3,361	6,087 37,570
	Remaining taxes
	attributed	609	304 534 2,404	632	555	602	1,091 6,731
	Total Tax Revenue	4,008	2,003 3,512 15,825	4,157	3,655	3,963	7,178 44,301
	Transfers from abroad	73	39	65	188	72	57	72	98	663
	Other revenues	738	390 649 1,884	720	569	725	983 6,658
	Total revenues Per Capita Revenues (€) 10,755 4,819 Source: Own calculations using National Income and Expenditure 2005 and County Income and 2,432 4,225 17,897 4,948 4,281 4,760 8,259 51,622 10,27110,716 15,639 11,315 12,393 10,809 13,831 12,766 F o r
	Regional GDP 2004.	P
			e
			e r
				R
					e
					v i e
							w
							O n l
									y

Table 3 .

 3 Regional Expenditure for 2004 (€ million).

	Border

Midlands West Dublin Mid-East Mid-West South-East South-West State

	Figure 4. Implied Real per capita Resource Transfers (2004 prices)
	Social transfers 4,000	1,766	870 1,533 4,634	1,398	1,390	1,733	2,285 15,609
	Other Subsidies	92	39 100	55	29	54	49	76	494
	Product Subsidies 3,000	174	82 154	796	168	168	187	381 2,110 Border
	Total Subsidies	2,032	991 1,787 5,485	1,595	1,612	1,969	2,742 18,213 Midlands
	attribution Total Subsidies 2,000	104 2,136	51 1,042 1,878 5,766 91 281	82 1,677	83 1,695	101 2,070	140 2,882 19,145 932 West
	wage bill 1,000 €	1,474	862 1,354 4,395	1,550	1,038	1,286	1,940 13,900 Dublin Mid-East
	other exp on goods and services expenditure on goods and services Other Expenditure Capital Expenditure F o r 829 2,303 606 -2,000 -1,000 0 F o r	459 763 2,381 1,321 2,117 6,777 320 533 1,547	830 2,380 591	592 1,630 467	713 2,000 595	1,092 7,658 3,031 21,558 807 5,467 Mid-West South-East South-West
	Roads Water & Sewerage Health 1 9 9 5 1 9 9 6	175 70 37 P 1 9 9 7 1 9 9 8 1 9 9 9 180 155 27 69 46 34 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 369 377 94 52 165 43 P	140 53 25	168 61 36	267 1,832 65 489 97 482
	Social Housing Public Buildings Source: Own calculations. 100 11 e 45 18 e Education 21 12 Other 125 99 108 55 31 16 Total GFCF 539 426 467 1,556 374 100 94 361 e r e r	61 50 18 182 784	53 14 26 94 406	81 9 15 111 480	103 17 60 184 1,264 871 249 264 794 5,451
	Total Expenditure Per Capita Expenditure (€) 12,460 5,583 Source: Own calculations using National Income and Expenditure 2005, County 3,109 4,995 15,646 5,431 21,077 4,198 5,145 7,515 13,129 12,667 13,672 12,420 12,154 11,683 R R 12,585 12,766 e e
	Income and Regional GDP 2004 and Construction Industry Review and Outlook. v i e v i e
					w w
					O n l O n l
							y y
				32

Table 4 .

 4 Correlation Coefficients for the relationship between per capita real GVA and per capita real revenue, real expenditure and real transfers

	Year	Per-capita	Per-capita	Per-capita
		revenue	expenditure	transfers
	1995	0.99***	0.71**	-0.88***
	1996	0.98***	0.80**	-0.86***
	1997	0.97***	0.75**	-0.89***
	1998	0.96***	0.68*	-0.96***
	1999	0.97***	0.66*	-0.96***
	2000	0.95***	0.57	-0.95***
	2001	0.92***	0.66*	-0.90***
	2002	0.95***	0.48	-0.98***
	2003	0.97***	0.39	-0.99***
	2004	0.98***	0.42	-0.96***
	Note: * denotes significance at the 90% confidence level, ** denotes significance at the 95%
	confidence level and *** denotes significance at the 99% confidence level.

Table A1 .

 A1 Summary Regional Government Accounts (million €)

		Border
		Midlands
		West
		Dublin
		Mid-East
		Mid-West
		South-East
	F o r	South-West
	Source: Own calculations. The deflator is taken from Construction Industry Review and Outlook P
	e
	e r
	R
	e
	v i e
	w
	O n l
		y
	35

1995 Border Midlands West Dublin Mid-EastMid-WestSouth-East South-West State

	Total Tax Revenue	1,557	7141,244 6,158	1,578	1,425	1,551	2,59716,824
	Transfers from abroad	112	56 96 288	95	87	108	150 992
	Other revenues	883	442 754 2,264	745	684	846	1,180 7,797
	Total revenues	2,552	1,2132,093 8,710	2,418	2,195	2,505	3,92725,614
	Total Subsidies	943	437 815 2,672	673	738	846	1,271 8,395
	Expenditure on goods and services	910	439 718 2,921	844	609	725	1,156 8,323
	Other Expenditure	870	436 742 2,230	734	673	834	1,162 7,681
	Total GFCF	148	71 120 341	116	88	123	207 1,215
	Total Expenditure	2,870	1,3832,396 8,163	2,367	2,109	2,527	3,79725,614
	Balance 1996 Total Tax Revenue Transfers from abroad Other revenues F o r	-318 1,760 107 1,212	-170 -302 547 7871,400 7,023 54 92 278 6121,049 3,149	51 1,717 91 1,034	86 1,548 83 944	-22 1,712 103 1,165	130 2,80318,751 0 143 952 1,62710,791
	Total revenues Total Subsidies Expenditure on goods and services P 3,079 1,001 831 Other Expenditure 1,269 Total GFCF 173 e Total Expenditure 3,273 Balance -194 e 1,4532,541 10,450 470 864 2,922 473 763 3,251 6401,098 3,298 91 139 371 1,6752,863 9,842 -222 -322 608 r	2,842 723 865 1,083 134 2,805 37	2,575 800 631 988 118 2,537 38	2,980 907 732 1,220 149 3,009 -28	4,57330,494 1,347 9,034 1,199 8,746 1,70311,299 238 1,413 4,48930,493 85 1
	1997 Total Tax Revenue Transfers from abroad Other revenues Total revenues Total Subsidies Expenditure on goods and services Other Expenditure Total GFCF Total Expenditure Balance	1,958 122 1,176 3,256 1,071 971 1,320 246 3,609 -353	8711,530 8,060 62 106 320 R 6011,020 3,089 1,5342,656 11,469 e 507 991 3,082 533 764 3,613 6751,145 3,469 99 157 423 v i 2,029 108 1,040 3,177 788 962 1,168 167 e 1,8143,058 10,587 3,085 -280 -402 882 92 w	1,743 95 916 2,753 859 662 1,028 162 2,711 42	1,854 117 1,133 3,104 968 789 1,272 193 3,222 -118	3,28221,328 164 1,093 1,58210,556 5,02732,977 1,485 9,751 1,382 9,676 1,77611,854 248 1,696 4,89232,977 136 0
	1998 Total Tax Revenue Transfers from abroad Other revenues Total revenues Total Subsidies Expenditure on goods and services 1,052 2,195 126 865 3,186 1,161	9371,764 9,218 65 109 331 445 750 2,278 1,4462,623 11,827 5481,038 3,256 544 911 3,841	2,125 113 779 3,017 846 O 1,992 99 678 2,769 926 n 2,067 122 840 3,029 1,048 l 1,149 821 957 y	3,75924,058 169 1,133 1,167 7,802 5,09532,993 1,57610,399 1,36610,640
	Other Expenditure	1,094	562 948 2,882	985	858	1,063	1,476 9,868
	Total GFCF	313	110 211 556	205	191	207	293 2,086
	Total Expenditure	3,620	1,7643,108 10,535	3,185	2,796	3,274	4,71132,993
	Balance	-434	-318 -485 1,292	-167	-27	-245	384	0
			36

Table A1 .

 A1 Summary Regional Government Accounts continued

1999 Border Midlands West Dublin Mid-EastMid-West South-East South-West State

	Total Tax Revenue	2,443	1,0171,951 10,939	2,616	2,282	2,327	4,33227,907
	Transfers from abroad	114	59 98 299	104	90	111	154 1,030
	Other revenues	2,163	1,1151,861 5,664	1,978	1,701	2,110	2,92219,514
	Total revenues	4,721	2,1913,910 16,902	4,699	4,072	4,548	7,40948,451
	Total Subsidies	1,409	6601,269 3,916	1,042	1,117	1,279	1,90712,599
	expenditure on goods and services 1,148	6011,064 4,189	1,307	922	1,123	1,58211,936
	Other Expenditure	2,343	1,2082,016 6,136	2,143	1,842	2,285	3,16521,138
	Total GFCF	401	169 294 715	273	295	270	361 2,779
	Total Expenditure	5,301	2,6384,643 14,956	4,765	4,176	4,957	7,01548,451
	Balance	-580	-446 -733 1,946	-66	-104	-410	393	0
	2000	Border Midlands West Dublin Mid-EastMid-West South-East South-West State
	Total Tax Revenue	2,721	1,2382,431 12,246	3,079	2,655	2,784	4,96432,119
	Transfers from abroad	77	40 66 200	71	60	75	103 692
	Other revenues	310	160 267 809	287	243	301	416 2,793
	Total revenues	3,108	1,4382,764 13,255	3,437	2,959	3,160	5,48435,604
	Total Subsidies	1,339	6301,212 3,703	977	1,081	1,245	1,80711,995
	expenditure on goods and services 1,337	7481,229 4,725	1,502	1,072	1,241	1,77213,626
	Other Expenditure	692	356 597 1,806	640	543	673	930 6,238
	Total GFCF	472	171 385 1,144	382	388	317	486 3,745
	Total Expenditure	3,839	1,9063,423 11,378	3,502	3,084	3,476	4,99635,604
	Balance	-731	-468 -659 1,876	-65	-125	-316	488	0
	2001	Border Midlands West

Dublin Mid-EastMid-West South-East South-West State

	Total Tax Revenue	2,842	1,4212,434 12,772	3,415	2,741	2,977	5,25033,853
	Transfers from abroad	85	44 74 222	80	67	84	115 772
	Other revenues	662	343 574 1,726	625	522	649	891 5,991
	Total revenues	3,589	1,8083,082 14,720	4,120	3,331	3,710	6,25640,616
	Total Subsidies	1,617	7681,442 4,413	1,206	1,288	1,516	2,21714,468
	expenditure on goods and services 1,614	8491,439 5,328	1,731	1,275	1,528	2,13715,900
	Other Expenditure	564	292 489 1,469	532	445	552	759 5,101
	Total GFCF	533	201 492 1,680	552	548	417	724 5,147
	Total Expenditure	4,328	2,

1113,862 12,891 4,021 3,555 4,012 5,83640,616 Balance -739 -302 -780 1,829 99 -224 -303 420 0 2002 Border Midlands West Dublin Mid-EastMid-West South-East South-West State

	F o r
	P
	e
		e r
			R
			e
			v i e
				w
	Total Tax Revenue Transfers from abroad Other revenues Total revenues Total Subsidies expenditure on goods and services 1,815 3,164 86 1,920 5,170 1,806	1,5602,660 13,074 45 75 222 1,0001,688 4,984 2,6054,423 18,280 8751,608 4,829 1,0441,709 5,898	3,530 82 1,831 5,443 1,419 O 2,840 67 1,507 4,415 1,439 n 3,356 84 1,880 5,320 1,723 l 2,001 1,480 1,866 y	6,12736,312 115 776 2,57617,386 8,81854,474 2,49716,196 2,43818,250
	Other Expenditure	1,609	8381,415 4,178	1,535	1,263	1,576	2,15914,574
	Total GFCF	528	307 499 1,716	687	507	445	764 5,454
	Total Expenditure	5,758	3,0655,230 16,620	5,643	4,689	5,610	7,85854,474
	Balance	-588	-459 -807 1,660	-200	-275	-290	959	-1
			37

Table A1 .

 A1 Regional Government Accounts (continued)

2003 Border Midlands West Dublin Mid-EastMid-West South-East South-West State

	Total Tax Revenue	3,542	1,7562,976 14,319	3,675	3,125	3,585	6,604 39,583
	Transfers from abroad	62	33 55	160	60	48	61	83 563
	Other revenues	864	453 764 2,232	837	674	850	1,158 7,831
	Total revenues	4,468	2,2423,795 16,711	4,572	3,847	4,496	7,846 47,977
	Total Subsidies	1,987	9661,743 5,329	1,543	1,567	1,914	2,707 17,755
	Expenditure on goods and services 2,026	1,2051,874 6,256	2,204	1,595	1,905	2,618 19,684
	Other Expenditure	579	304 512 1,496	561	451	569	776 5,249
	Total GFCF	442	330 449 1,735	783	398	447	706 5,289
	Total Expenditure	5,034	2,8044,577 14,816	5,091	4,012	4,836	6,807 47,977
	Balance	-566	-562 -782 1,895	-519	-165	-341	1,039	0
	2004	Border Midlands West Dublin Mid-EastMid-West South-East South-West State
	Total Tax Revenue	4,008	2,0033,512 15,825	4,157	3,655	3,963	7,178 44,301
	Transfers from abroad	73	39 65 188	72	57	72	98	663
	Other revenues	738	390 649 1,884	720	569	725	983 6,658
	Total revenues	4,819	2,4324,225 17,897	4,948	4,281	4,760	8,259 51,622
	Total Subsidies	2,136	1,0421,878 5,766	1,677	1,695	2,070	2,882 19,145
	Expenditure on goods and services 2,303	1,3212,117 6,777	2,380	1,630	2,000	3,031 21,558
	Other Expenditure	606	320 533 1,547	591	467	595	807 5,467
	Total GFCF	539	426 467 1,556	784	406	480	794 5,451
	Total Expenditure	5,583	3,1094,995 15,646	5,431	4,198	5,145	7,515 51,622
	Balance	-764	-677 -769 2,251	-483	83	-385	744	0

http://mc.manuscriptcentral.com/cres Email: regional.studies@fm.ru.nlRegional Studies

H72 -State and Local Budget and Expenditures < H7 -State and Local Government|Intergovernmental Relations < H -Public

Economics, H77 -Intergovernmental Relations|Federalism < H7 -State and Local Government|Intergovernmental Relations < H -Public Economics, R11 -Regional Economic Activity: Growth, Development, and Changes < R1 -General Regional Economics < R -Urban, Rural, and Regional Economics Regional Disparities, Government Expenditure, Taxes http://mc.manuscriptcentral.com/

MACKAY R.R. (2001) Regional Taxing and Spending: The Search for Balance, Regional Studies, 35, 563-575. MACKAY R.R. (2003) Twenty-five Years of Regional Development, Regional Studies, 37, 303-318. MCLEAN I. and MCMILLAN A. (2003) The Distribution of Public Expenditure across the UK Regions. Fiscal Studies 24, 45-71. MEYLER, A. and STROBL E. (2000) Job Generation and Regional Industrial Policy in Ireland, Economic and Social Review, 31, 111-128. MORGENROTH E. (2000) Regionalisation and the functions of regional and local government" in BARRETT A. (ed.) Budget Perspectives. Economic and Social Research Institute, Dublin MORGENROTH E. (2003) An Assessment of the National Spatial Strategy, ESRI Seminar Paper, February. MORGENROTH E. (2008) Economic Integration and Structural Change: The Case of Irish Regions, in KRIEGER-BODEN C., MORGENROTH E., and PETRAKOS G. (Eds.) The Impact of European Integration on Regional Structural Change and Cohesion. London, Routledge. NOLAN B. and Smeeding T. (2005) Ireland's Income Distribution in Comparative Perspective, Review of Income Wealth. 51, 537-559. O'LEARY E. (1999), "Regional Income Estimates for Ireland, 1995, Regional Studies, 33, 805-814. O'LEARY E. (2001), Regional Divergence in the Celtic Tiger: The Policy Dilemma, Irish Banking Review, Spring, 2-15.

Page 24 of 37 http://mc.manuscriptcentral.com/cres Email: regional.studies@fm.ru.nl

Regional Studies