Fiscal federalism and the composition of public investment in Europe
We analyse the determinants of the composition of public investment in Europe, with a special focus on the role of fiscal decentralisation. The results suggest that fiscal decentralisation boosts economically productive public investment, notably infrastructure, and curbs the relative share of economically less productive investment, such as recreational facilities. While not readily reconcilable with the traditional theory of fiscal federalism, these findings can be interpreted in terms of the literature on fiscal competition, with not only tax rates but also the quality of public expenditure weighing in firms' location decisions.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alessandro Turrini, 2004. "Public investment and the EU fiscal framework," European Economy - Economic Papers 2008 - 2015 202, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, vol. 3(3), pages 397-412, July.
- Keen, Michael & Marchand, Maurice, 1997.
"Fiscal competition and the pattern of public spending,"
Journal of Public Economics,
Elsevier, vol. 66(1), pages 33-53, October.
- KEEN, Michael & MARCHAND, Maurice, 1996. "Fiscal Competition and the Pattern of Public Spending," CORE Discussion Papers 1996001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Keen, M. & Marchand, M., . "Fiscal competition and the pattern of public spending," CORE Discussion Papers RP 1284, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
- Hans-Werner Sinn, 2004.
"The New Systems Competition,"
Perspektiven der Wirtschaftspolitik,
Verein für Socialpolitik, vol. 5(1), pages 23-38, 02.
- Hans-Werner Sinn, 2001. "The New Systems Competition," CESifo Working Paper Series 623, CESifo Group Munich.
- Sinn, Hans-Werner, 2004. "The new systems competition," Munich Reprints in Economics 19608, University of Munich, Department of Economics.
- Hans-Werner Sinn, 2002. "The New Systems Competition," NBER Working Papers 8747, National Bureau of Economic Research, Inc.
- Falch, Torberg & Rattso, Jorn, 1997. "Political economic determinants of school spending in federal states: Theory and time-series evidence," European Journal of Political Economy, Elsevier, vol. 13(2), pages 299-314, May.
- Matsumoto, Mutsumi, 1998. "A note on tax competition and public input provision," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 465-473, July.
- Aaron Mehrotra & Timo Välilä, 2006. "Public Investment in Europe: Evolution and Determinants in perspective," Fiscal Studies, Institute for Fiscal Studies, vol. 27(4), pages 443-471, December.
- Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
- Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- Hulten, Charles R. & Schwab, Robert M., 1997. "A fiscal federalism approach to infrastructure policy," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 139-159, April.
- Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- de Haan, Jakob & Sturm, Jan-Egbert, 1997. "Political and economic determinants of OECD budget deficits and government expenditures: A reinvestigation," European Journal of Political Economy, Elsevier, vol. 13(4), pages 739-750, December.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Dan Stegarescu, 2005. "Public sector decentralisation: measurement concepts and recent international trends," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 301-333, September.
When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:24:y:2008:i:3:p:562-570. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.