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Are the responsibility and yardstick competition hypotheses mutually consistent?

Author

Listed:
  • Fabio Padovano

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Ilaria Petrarca

    (Department of Economics - UNIVR - Università degli studi di Verona = University of Verona)

Abstract

This paper tests the consistency between the responsibility and the yardstick competition hypotheses. If no evidence is found that voters reelect mayors comparing their performance with those of neighboring jurisdictions, strategic interactions among municipalities cannot be properly interpreted as yardstick competition. We innovate on the literature by looking at different indicators of popularity and several specifications of inter-jurisdictional comparisons. The dataset includes all Italian municipalities for the entire period when mayors could set the property tax rate, e.g., 1995–2004, considering all interjurisdictional comparisons and relaxing the implicit hypothesis of cross section analysis that observed phenomena are on their steady state equilibrium. The estimates confirm the presence of electoral concerns of the incumbents and a significant spatial correlation of the tax rates, especially among neighboring nonterm limited mayors. Given these results, strategic interactions among Italian municipalities appear consistent with the predictions of yardstick competition theory.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Fabio Padovano & Ilaria Petrarca, 2014. "Are the responsibility and yardstick competition hypotheses mutually consistent?," Post-Print halshs-00911855, HAL.
    • Handle: RePEc:hal:journl:halshs-00911855
    DOI: 10.1016/j.ejpoleco.2013.09.006
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    Cited by:

    1. Giovanni Millo, 2022. "The generalized spatial random effects model in R," Journal of Spatial Econometrics, Springer, vol. 3(1), pages 1-18, December.
    2. Ferraresi Massimiliano, 2021. "Political Budget Cycle, Tax Collection, and Yardstick Competition," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(3), pages 1149-1161, July.
    3. Benoît LE MAUX & Kristýna DOSTÁLOVÁ & Antti MOISIO, 2017. "Do political parties matter? Endogenous fragmentation, partisanship, and local public expenditures in Finland," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2017-02-ccr, Condorcet Center for political Economy.
    4. Vincent, Rose Camille & Osei Kwadwo, Victor, 2022. "Spatial interdependence and spillovers of fiscal grants in Benin: Static and dynamic diffusions," World Development, Elsevier, vol. 158(C).
    5. J. Sebastian Leguizamon & Casto Martin Montero Kuscevic, 2019. "Party Cues, Political Trends, And Fiscal Interactions In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 600-620, October.
    6. Benoît LE MAUX & Kristýna DOSTÁLOVÁ & Fabio PADOVANO, 2017. "Ideology and Public Policies: A Quasi-Experimental Test of the Hypothesis that Left-Wing Governments Spend More," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2017-01-ccr, Condorcet Center for political Economy.
    7. Linda Gonçalves Veiga & Francisco veiga, 2016. "Term limits at the local government level," NIPE Working Papers 7/2016, NIPE - Universidade do Minho.
    8. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.
    9. Oliviero, Tommaso & Scognamiglio, Annalisa, 2019. "Property tax and property values: Evidence from the 2012 Italian tax reform," European Economic Review, Elsevier, vol. 118(C), pages 227-251.
    10. Luis Ayala & Ana Herrero & Jorge Martinez‐Vazquez, 2021. "Welfare benefits in highly decentralized fiscal systems: Evidence on interregional mimicking," Papers in Regional Science, Wiley Blackwell, vol. 100(5), pages 1178-1208, October.
    11. Linda G. Veiga & Georgios Efthyvoulou & Atsuyoshi Morozumi, 2018. "Political Budget Cycles: Conditioning Factors and New Evidence," NIPE Working Papers 21/2018, NIPE - Universidade do Minho.
    12. Cassette, Aurélie & Farvaque, Etienne, 2016. "A dirty deed done dirt cheap: Reporting the blame of a national reform on local politicians," European Journal of Political Economy, Elsevier, vol. 43(C), pages 127-144.
    13. Benoît Le Maux & Kristýna Dostálová & Fabio Padovano, 2020. "Ideology or voters? A quasi-experimental test of why left-wing governments spend more," Public Choice, Springer, vol. 182(1), pages 17-48, January.

    More about this item

    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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