Welfare Benefits in Highly Decentralized Fiscal Systems: Evidence on Interterritorial Mimicking

Luis Ayala, Ana Herrero and Jorge Martinez-Vazquez ()
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Ana Herrero: Facultad de Derecho, UNED, Spain

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: This paper analyzes the determinants of welfare benefit levels within a highly fiscally decentralized context. More specifically, we analyze the role of mimicking as a driver of the institutional design of subnational government policies in the absence of federal co-ordination and financing. Empirically we focus on the welfare benefit programs of Spanish regional governments during the period 1996-2015. Our results strongly support the significant role played by mimicking: regional public agents observe what their peers are doing and act accordingly, and this takes place even in a context of low mobility of households. Moreover, we find evidence of vertical externalities: even in a completely decentralized framework, regions consider the benefits set by the central government as a benchmark when determining their own welfare benefit levels.

Pages: 36 pages
Date: 2019-04
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper1905

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