Understanding citizens’ knowledge and preferences for fiscal equalization in decentralized countries

This paper examines how personal attributes and attitudes, and contextual factors shape citizens’ knowledge and preferences regarding fiscal equalization in multilevel governance systems. Our findings reveal that most individuals possess a limited understanding of the equalization system in Spain. Moreover, an informational bias arises among those with strong regional identities. Concerning preferences, we find a double effect of regional identities pushing in the same direction. The average individual of wealthier territories where identities are stronger (Catalonia, the Basque Country, and Navarre) is less prone to equalization, and this effect is strengthened in the case of individuals with pronounced regional identities. Finally, we find only weak evidence that citizens’ knowledge affects their preferences towards the design or outcomes of fiscal equalization. These insights provide valuable guidance to countries undergoing decentralization processes, highlighting the importance of early public discussions to prevent future challenges and political conflicts.