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Does Inter-jurisdictional Competition Engender a “Race to the Bottom”? A Meta-Regression Analysis

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  • Joan Costa-Font
  • Filipe De-Albuquerque
  • Hristos Doucouliagos

Abstract

type="main" xml:id="ecpo12066-abs-0001"> A growing literature documents the existence of strategic political reactions to public expenditure between rival jurisdictions. These interactions can potentially create a downward expenditure spiral (“race to the bottom”) or a rising expenditure spiral (“race to the top”). However, in the course of identifying the existence of such interactions and ascertaining their underlying triggers, the empirical evidence has produced markedly heterogeneous findings. Most of this heterogeneity can be traced back to study design and institutional differences. This article contributes to the literature by applying meta-regression analysis to quantify the magnitude 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 strategic interactions: (i) are weakening over time, (ii) are stronger among municipalities than among higher levels of government, and (iii) appear to be more influenced from tax competition than yardstick competition, with capital controls and fiscal decentralization shaping the magnitude of fiscal interactions.

Suggested Citation

  • Joan Costa-Font & Filipe De-Albuquerque & Hristos Doucouliagos, 2015. "Does Inter-jurisdictional Competition Engender a “Race to the Bottom”? A Meta-Regression Analysis," Economics and Politics, Wiley Blackwell, vol. 27(3), pages 488-508, November.
  • Handle: RePEc:bla:ecopol:v:27:y:2015:i:3:p:488-508
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    File URL: http://hdl.handle.net/10.1111/ecpo.2015.27.issue-3
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    Cited by:

    1. Zareh Asatryan & Annika Havlik & Frank Streif, 2017. "Vetoing and inaugurating policy like others do: evidence on spatial interactions in voter initiatives," Public Choice, Springer, vol. 172(3), pages 525-544, September.
    2. repec:wly:econjl:v::y:2017:i:605:p:f236-f265 is not listed on IDEAS
    3. Cavalieri, Marina & Ferrante, Livio, 2016. "Does fiscal decentralization improve health outcomes? Evidence from infant mortality in Italy," Social Science & Medicine, Elsevier, vol. 164(C), pages 74-88.
    4. repec:ipf:psejou:v:43:y:2019:i:2:p:115-139 is not listed on IDEAS
    5. Hans Pitlik & Christina Seyfried, 2016. "Steuerautonomie der Schweizer Kantone: Vorbild für Österreich?," WIFO Monatsberichte (monthly reports), WIFO, vol. 89(6), pages 423-435, June.
    6. repec:wly:econjl:v:127:y:2017:i:605:p:f236-f265 is not listed on IDEAS

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