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Horizontal Interaction on Local Councils' Expenditures. Evidence from Italy

  • Barbara ERMINI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Raffaella SANTOLINI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

This paper seeks for public spending interdependence among jurisdictions within some Italian local councils. We find significant positive interaction among spending of neighboring local councils both at the level of total expenditure and also for different subcategories. However, this result applies only when spatial dependence is analyzed among geographically contiguous jurisdictions different criteria of proximity do not give rise to any substantial form of interaction among local governments. Attempts to identifying the source of this interaction seem to refuse yardstick competition hypothesis. Fiscal spill-overs among jurisdictions appear as a more plausible explanation; we also find evidence that local councils partnerships fail to effectively internalize these spill-overs. Finally, commuting affects spatial interdependence among jurisdictions.

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File URL: http://docs.dises.univpm.it/web/quaderni/pdf/278.pdf
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Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 278.

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Length: 25
Date of creation: Feb 2007
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Handle: RePEc:anc:wpaper:278
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  1. Federico Revelli, 2002. "Testing the taxmimicking versus expenditure spill-over hypotheses using English data," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1723-1731.
  2. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
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  4. Saavedra, Luz Amparo, 2000. "A Model of Welfare Competition with Evidence from AFDC," Journal of Urban Economics, Elsevier, vol. 47(2), pages 248-279, March.
  5. Harry H. Kelejian & Ingmar R. Prucha, 1997. "Estimation of Spatial Regression Models with Autoregressive Errors by Two Stage Least Squares Procedures: A Serious Problem," Electronic Working Papers 97-001, University of Maryland, Department of Economics.
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  7. SALMON, Pierre, 1987. "Decentralization as an incentive scheme," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
  8. Baicker, Katherine, 2005. "The spillover effects of state spending," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 529-544, February.
  9. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  10. Anne Case, 1993. "Interstate tax competition after TRA86," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 136-148.
  11. Heyndels, Bruno & Vuchelen, Jef, 1998. "Tax Mimicking Among Belgian Municipalities," National Tax Journal, National Tax Association, vol. 51(n. 1), pages 89-101, March.
  12. Revelli, Federico, 2003. "Reaction or interaction? Spatial process identification in multi-tiered government structures," Journal of Urban Economics, Elsevier, vol. 53(1), pages 29-53, January.
  13. Federico Revelli, 2001. "Spatial patterns in local taxation: tax mimicking or error mimicking?," Applied Economics, Taylor & Francis Journals, vol. 33(9), pages 1101-1107.
  14. Aronsson, Thomas & Lundberg, Johan & Wikstrom, Magnus, 2000. "The impact of regional public expenditures on the local decision to spend," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 185-202, March.
  15. Figlio, David N. & Kolpin, Van W. & Reid, William E., 1999. "Do States Play Welfare Games?," Journal of Urban Economics, Elsevier, vol. 46(3), pages 437-454, November.
  16. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer, vol. 12(4), pages 475-492, August.
  17. 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.
  18. 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.
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