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Spatial Strategic Interaction on Public Expenditures of The Northern Portuguese Local Governments

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  • Barreira, Ana

    ()
    (University of Algarve)

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    Abstract

    The existence of spatial strategic interaction between neighbouring local governments is often referred in literature and identified in empirical applications for several countries. The spatial interaction in local government expenditure finds support on three theoretical explanations: spillover effects, Tiebout competition or mimicking behaviour. Identify the adequate explanation for the local government interaction is not an easy task since the reduced form of the estimated model can generate indistinguishable pattern in spatial interactions. This paper seeks to identify between those theoretical explanations what is the underlying reason for spatial interaction in public expenditures among local governments for the case of a particular sub-area of Portugal. Using differentiated model configurations and the local government expenditures of the municipalities composing the Northern Portuguese mainland, between 1998 and 2008, the paper identifies the structural model that generates the observed spatial auto-correlation in local public expenditures. Among the various theoretical reasons, only the existence of spillovers effects finds support.

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    Bibliographic Info

    Paper provided by CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve in its series Spatial and Organizational Dynamics Discussion Papers with number 2011-2.

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    Length: 16 pages
    Date of creation: 31 Mar 2011
    Date of revision:
    Handle: RePEc:ris:cieodp:2011_002

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    Postal: University of Algarve, Faculty of Economics, Campus de Gambelas, 8005-139 Faro, Portugal, email of President of the Centre: mtvaz@ualg.pt
    Phone: +351 289 244 406
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    Keywords: local public expenditures; horizontal spatial interaction; spatial econometrics;

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    1. Debarsy, Nicolas & Ertur, Cem, 2010. "Testing for spatial autocorrelation in a fixed effects panel data model," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 40(6), pages 453-470, November.
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    3. Elhorst, J. Paul, 2001. "Panel data models extended to spatial error autocorrelation or a spatially lagged dependent variable," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 01C05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    4. J. Elhorst, 2010. "Applied Spatial Econometrics: Raising the Bar," Spatial Economic Analysis, Taylor & Francis Journals, Taylor & Francis Journals, vol. 5(1), pages 9-28.
    5. J. Paul Elhorst & Sandy Fréret, 2009. "Evidence Of Political Yardstick Competition In France Using A Two-Regime Spatial Durbin Model With Fixed Effects," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 49(5), pages 931-951.
    6. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, Elsevier, vol. 52(3), pages 285-307, October.
    7. Anselin, Luc, 1990. "Some robust approaches to testing and estimation in spatial econometrics," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 20(2), pages 141-163, September.
    8. Borck, Rainald & Caliendo, Marco & Steiner, Viktor, 2006. "Fiscal Competition and the Composition of Public Spending: Theory and Evidence," IZA Discussion Papers 2428, Institute for the Study of Labor (IZA).
    9. Anselin, Luc & Hudak, Sheri, 1992. "Spatial econometrics in practice : A review of software options," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 22(3), pages 509-536, September.
    10. Epple, Dennis & Nechyba, Thomas, 2004. "Fiscal decentralization," Handbook of Regional and Urban Economics, Elsevier, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 55, pages 2423-2480 Elsevier.
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    Cited by:
    1. Santos, Joana & Gonçalves, Gabriela & Gomes, Alexandra, 2013. "Organizational Culture and Subjective and Work Well-being. The Case of Employees of Portuguese Universities," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 1(3), pages 153-161.

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