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Asymmetric and Non-Linear Adjustments in Local Fiscal Policy

Author

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  • Gabriella Legrenzi

    () (Keele University, Centre for Economic Research and School of Economic and Management Studies)

  • Costas Milas

    () (Keele University, Centre for Economic Research and School of Economic and Management Studies)

Abstract

We introduce possible asymmetries and non-linearities in the analysis of the taxing and spending decisions of local governments. Our empirical results evidence a down-ward inflexibility of both local government spending and taxation, pointing to a budget-maximizing local government. These asymmetries will need to be explicitly tackled in fiscal federalism reforms, in order for decentralization to positively contribute to the achievement of the European Monetary Union objectives.

Suggested Citation

  • Gabriella Legrenzi & Costas Milas, 2006. "Asymmetric and Non-Linear Adjustments in Local Fiscal Policy," Keele Economics Research Papers KERP 2006/16, Centre for Economic Research, Keele University.
  • Handle: RePEc:kee:kerpuk:2006/16
    Note: An earlier version of this paper has been presented at the North American Summer Meeting of the Econometric Society, and at the annual meeting of the European Public Choice Society. We would like to thank the participants for their useful feedback. The usual disclaimer applies.
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    File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0616.pdf
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    References listed on IDEAS

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    Cited by:

    1. Elena Gennari & Giovanna Messina, 2014. "How sticky are local expenditures in Italy? Assessing the relevance of the flypaper effect through municipal data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 324-344, April.
    2. Elena Gennari & Giovanna Messina, 2012. "How sticky are local expenditures in Italy? Assessing the relevance of the �flypaper effect� through municipal data," Temi di discussione (Economic working papers) 844, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    Fiscal federalism; non-linear time series; asymmetric adjustment; fly-paper effect;

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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