Economics at your fingertips  

Testing the taxmimicking versus expenditure spill-over hypotheses using English data

Federico Revelli ()

Applied Economics, 2002, vol. 34, issue 14, 1723-1731

Abstract: Spatial interaction among local governments in tax setting and public spending decisions is receiving increasing attention in the applied public economics literature. Spatial interaction models rely on the presence of an externality from local budget making: in traditional public finance models, external effects originate either from interjurisdictional resource flows due to tax competition for a mobile base, or from local public expenditure spill-overs into neighbouring jurisdictions. However, the recent political agency/yardstick competition literature has stressed the role of 'informational' externalities between neighbouring jurisdictions, and predicted tax mimicry at the local level. The actual relevance of the above hypotheses clearly needs to be assessed empirically. In this paper, an attempt is made at discriminating between alternative sources of local fiscal interaction, by using data on the English municipal authorities' budgets. While both public spending levels and local property tax rates exhibit considerable positive spatial autocorrelation, maximum likelihood and instrumental variables estimation results suggest that the interdependence among local governments can be attributed to mimicking behaviour in local property tax setting.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (58) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

DOI: 10.1080/00036840210122353

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

Page updated 2020-07-03
Handle: RePEc:taf:applec:v:34:y:2002:i:14:p:1723-1731