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

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  • Albert Solé Ollé

    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

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.

Suggested Citation

  • Albert Solé Ollé, 2005. "Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain," Working Papers 2005/3, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2005-3
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Budget spillovers; Local expenditures; Spatial econometrics;
    All these keywords.

    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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