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Policy Innovation in Local Jurisdictions: Testing the Neighborhood Influence Against the Free-Riding Hypothesis

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  • Johannes Rincke

    (Zentrum für Europäische Wirtschaftsforschung)

Abstract

Before making di±cult decisions, individuals tend to collect information on decision makers in reference groups. With respect to policy innovations in a decentralized public sector, this may give rise to positive neighborhood influence on adoption decisions. On the other hand, due to learning externalities, an incentive exists to free-ride on policy experiments of others. In this paper, U.S. data on school district policies are used to show that with respect to policy experiments, decision makers indeed are heavily affected by decision makers in reference groups. The results suggest that if a given district's neighbors' expected benefits from adopting a new policy increase, this substantially increases the original district's probability of adoption. The paper thus rejects the free-riding hypothesis and supports the view that in federal systems the discusion of policy innovations is stimulated by horizontal interactions between jurisdictions.

Suggested Citation

  • Johannes Rincke, 2005. "Policy Innovation in Local Jurisdictions: Testing the Neighborhood Influence Against the Free-Riding Hypothesis," Public Economics 0511017, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwppe:0511017
    Note: Type of Document - pdf; pages: 23. ZEW Discussion Paper No. 05-08
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/pe/papers/0511/0511017.pdf
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    References listed on IDEAS

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    Cited by:

    1. Rincke, Johannes, 2005. "Neighborhood Influence and Political Change: Evidence from US School Districts," ZEW Discussion Papers 05-16, ZEW - Leibniz Centre for European Economic Research.
    2. Johannes Rincke, 2005. "Neighborhood Influence and Political Change: Evidence from US School Districts," Public Economics 0511011, University Library of Munich, Germany.
    3. Lars P. Feld, 2006. "Regulatory Competition and Federalism in Switzerland: Diffusion by Horizontal and Vertical Interaction," CREMA Working Paper Series 2006-22, Center for Research in Economics, Management and the Arts (CREMA).

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    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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