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Yardstick competition and fiscal disparities: An experimental study

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  • Di Liddo, Giuseppe
  • Morone, Andrea

Abstract

Recent theoretical research suggest that yardstick competition may be biased by the presence of fiscal disparities between local governments and that fiscal equalization may help in correcting this bias. This paper provides an empirical test of these theoretical predictions by means of a laboratory experiment.

Suggested Citation

  • Di Liddo, Giuseppe & Morone, Andrea, 2017. "Yardstick competition and fiscal disparities: An experimental study," Economics Letters, Elsevier, vol. 159(C), pages 134-137.
  • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:134-137
    DOI: 10.1016/j.econlet.2017.07.033
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    References listed on IDEAS

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    1. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    2. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
    3. Di Liddo, Giuseppe & Giuranno, Michele G., 2016. "Asymmetric yardstick competition and municipal cooperation," Economics Letters, Elsevier, vol. 141(C), pages 64-66.
    4. R. Mark Isaac & James M. Walker, 1988. "Group Size Effects in Public Goods Provision: The Voluntary Contributions Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 179-199.
    5. Hansjörg Blöchliger & Claire Charbit, 2008. "Fiscal equalisation," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-22.
    6. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
    7. Allers, Maarten A., 2012. "Yardstick competition, fiscal disparities, and equalization," Economics Letters, Elsevier, vol. 117(1), pages 4-6.
    8. Buettner, Thiess & von Schwerin, Axel, 2016. "Yardstick competition and partial coordination: Exploring the empirical distribution of local business tax rates," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 178-201.
    9. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
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    Cited by:

    1. Giuseppe Di Liddo & Annalisa Vinella, 2019. "Asymmetric Yardstick Competition: Traditional Procurement versus Public-Private Partnerships," CESifo Working Paper Series 7449, CESifo Group Munich.

    More about this item

    Keywords

    Yardstick competition; Fiscal equalization; Experiment;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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