Suchergebnisse

A growing literature documents the existence of strategic political reactions to public expenditure in one jurisdiction on either neighboring or reference jurisdictions. The latter might give raise to downward expenditure spiral, or race to the bottom . However, in ascertaining the empirical triggers of such a process evidence is suggestive of markedly heterogeneous findings. Most of such heterogeneity can be traced back to study design and institutional differences. This paper contributes to the literature by applying meta-regression analysis to quantify the size and the direction of strategic inter-jurisdictional expenditure interactions controlling for study and institutional characteristics. We find several robust results beyond confirming that jurisdictions do engage in strategic expenditure interactions; namely that (i) interactions are weakening over time; (ii) strategic interactions are stronger among municipalities than among intermediate levels of government; and (iii) strategic interactions appear to emerge from tax competition rather than yardstick competition, with capital controls and fiscal decentralization shaping the magnitude of fiscal interactions. Hence, we conclude political decentralization structures that draw upon the political agency (yardstick competition) does not necessarily engender a race to the bottom'.

A large literature examines government fiscal interactions in federations. However, the empirical evidence is scattered and inconclusive, especially with respect to the size of interactions, as well as the institutional and economic determinants underpinning them. This paper uses meta-regression analysis to quantify the size of these inter-jurisdictional fiscal interactions and to explain the heterogeneity in empirical estimates. First, we find significantly stronger interactions among municipalities and nations than among intermediate levels of government. Second, tax interactions are, in general, stronger than expenditure interactions, and horizontal tax interactions appear to be stronger than vertical interactions. Third, both tax competition and yardstick competition are supported by the data, though the former appears to produce stronger interactions. Fourth, capital controls, voter turnout and the design of decentralization all shape fiscal interactions; political competition and fiscal decentralization both increase horizontal tax competition and they decrease vertical tax competition. Finally, much of the variation between estimates can be explained by country heterogeneity, differences in econometric specification and estimation strategies.