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Overlapping jurisdictions and demand for local public services: does spatial heterogeneity matter?


  • Marie-Estelle Binet

    (University of Rennes 1 - CREM, (UMR 6211 CNRS))

  • Alain Guengant

    (University of Rennes 1 - CREM, (UMR 6211 CNRS))

  • Matthieu Leprince

    (University of Rennes 1 - CREM, (UMR 6211 CNRS))


This paper aims to test the existence of vertical interactions in terms of public spending between overlapping local jurisdictions in France using a data set of 110 French municipalities and their corresponding departments in 2001 and 2005. To do so, we consider that demand for municipal services is conditioned by the services provided by departments. We then estimate two specifications which allow spatial heterogeneity to be modeled and which are compared with a simple spatial error specification (without spatial heterogeneity). The two estimated spatial regimes models are able to eradicate spatial autocorrelation in the error term. The estimation results show that an appropriate consideration of spatial heterogeneity can lead to new insights. The spatial error specification reveals a robust complementary demand relationship between services provided by departmental and municipal governments. However, these results are not in accord with the results produced by the spatial regime models, which provide evidence of heterogeneity with independence, complementarity or substitution between the services offered by the two overlapping jurisdictions.

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  • Marie-Estelle Binet & Alain Guengant & Matthieu Leprince, 2012. "Overlapping jurisdictions and demand for local public services: does spatial heterogeneity matter?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201213, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:201213

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    References listed on IDEAS

    1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    2. Rebecca J. Campbell, 2004. "Leviathan and Fiscal Illusion in Local Government Overlapping Jurisdictions," Public Choice, Springer, vol. 120(3_4), pages 301-329, September.
    3. Gérard, Marcel & Jayet, Hubert & Paty, Sonia, 2010. "Tax interactions among Belgian municipalities: Do interregional differences matter?," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 336-342, September.
    4. Oates, Wallace E., 1988. "On the measurement of congestion in the provision of local public goods," Journal of Urban Economics, Elsevier, vol. 24(1), pages 85-94, July.
    5. 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.
    6. Newman, Robert J. & Sullivan, Dennis H., 1988. "Econometric analysis of business tax impacts on industrial location: What do we know, and how do we know it?," Journal of Urban Economics, Elsevier, vol. 23(2), pages 215-234, March.
    7. Turnbull, Geoffrey K & Djoundourian, Salpie S, 1993. "Overlapping Jurisdictions: Substitutes or Complements?," Public Choice, Springer, vol. 75(3), pages 231-245, March.
    8. 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.
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    More about this item


    Local public expenditures; Overlapping jurisdictions; Spatial heterogeneity; Spatial econometrics;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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