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Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain

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  • Sole-Olle, Albert

Abstract

The paper presents a framework for measuring spillovers resulting from local expenditure policies. We identify and test for two different types of expenditure spillovers: (i) "benefit spillovers", arising from the provision of local public goods, and (ii) "crowding spillovers", arising from the crowding of facilities by residents in neighboring jurisdictions. Benefit spillovers are accounted for by assuming that the representative resident enjoys the consumption of a local public good in both his own community and in those surrounding it. Crowding spillovers are included by considering that a locality's consumption level is influenced by the population living in the surrounding localities. We estimate a reaction function, with interactions between local governments occurring not only between expenditure levels, but also between neighbors' populations and expenditures. The equation is estimated using data on more than 2,500 Spanish local governments for the year 1999. The results show that both types of spillovers are relevant.
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  • Sole-Olle, Albert, 2006. "Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain," Journal of Urban Economics, Elsevier, vol. 59(1), pages 32-53, January.
  • Handle: RePEc:eee:juecon:v:59:y:2006:i:1:p:32-53
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    Cited by:

    1. Oliver Falck & Michael Fritsch & Stephan Heblich, 2009. "Bohemians, Human Capital, and Regional Economic Growth," CESifo Working Paper Series 2715, CESifo Group Munich.
    2. Borck, Rainald & Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2015. "Race to the debt trap? — Spatial econometric evidence on debt in German municipalities," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 20-37.
    3. Joshua C. Hall & Josh Matti & Yang Zhou, 2017. "The Economic Impact of City-County Consolidations: A Synthetic Control Approach," Working Papers 17-08, Department of Economics, West Virginia University.
    4. Kristien Werck & Bruno Heyndels & Benny Geys, 2008. "The impact of ‘central places’ on spatial spending patterns: evidence from Flemish local government cultural expenditures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 32(1), pages 35-58, March.
    5. Emilie Caldeira & Martial Foucault & Gregoire Rota-Graziosi, 2015. "Decentralization in Africa and the nature of local governments’ competition: evidence from Benin," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(6), pages 1048-1076, December.
    6. Miriam Hortas-Rico & Albert Solé-Ollé, 2010. "Does Urban Sprawl Increase the Costs of Providing Local Public Services? Evidence from Spanish Municipalities," Urban Studies, Urban Studies Journal Limited, vol. 47(7), pages 1513-1540, June.
    7. Hernández, Aday & Jiménez, Juan Luis, 2014. "Does high-speed rail generate spillovers on local budgets?," Transport Policy, Elsevier, vol. 35(C), pages 211-219.
    8. Geys, Benny, 2006. "Looking across borders: A test of spatial policy interdependence using local government efficiency ratings," Journal of Urban Economics, Elsevier, vol. 60(3), pages 443-462, November.
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    13. Johanna Choumert & Laure Cormier, 2011. "The provision of urban parks: an empirical test of spatial spillovers in an urban area using geographic information systems," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(2), pages 437-450, October.
    14. Geys, Benny & Vermeir, Jan, 2008. "Party cues and yardstick voting," European Journal of Political Economy, Elsevier, vol. 24(2), pages 470-477, June.
    15. Francisco Delgado & Matías Mayor, 2011. "Tax mimicking among local governments: some evidence from Spanish municipalities," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(2), pages 149-164, August.
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    17. Hélia Silva & Linda Gonçalves Veiga & Miguel Portela, 2011. "Strategic Interaction in Local Fiscal Policy: Evidence from Portuguese Municipalities," NIPE Working Papers 23/2011, NIPE - Universidade do Minho.
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    19. Johanna Choumert & Walid Oueslati & Julien Salanié, 2008. "The effects of spatial spillovers on the provision of urban environmental amenities," Post-Print hal-00729739, HAL.
    20. David Bartolini & Raffaella Santolini, 2012. "Political yardstick competition among Italian municipalities on spending decisions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(1), pages 213-235, August.
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H49 - Public Economics - - Publicly Provided Goods - - - Other
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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