Spillover effects in local public spending

Massimiliano Ferraresi (), Giuseppe Migali and Leonzio Rizzo

Regional Studies, 2018, vol. 52, issue 11, 1570-1584

Abstract: This paper investigated the fiscal interactions between Italian municipalities over the period 2001–11 and found a positive horizontal interdependence in spending decisions. The results are robust to different specifications of the spatial neighbours and are confirmed by a natural experiment (an earthquake in the Abruzzo region of Italy in 2009) that creates an exogenous variation in the neighbours’ spending. Furthermore, there is no evidence of yardstick competition when one considers political effects, while a negative relationship is found between spatial interaction and the size of the municipality. Thus, it can be concluded that spillover effects drive the strategic interactions in spending decisions.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:taf:regstd:v:52:y:2018:i:11:p:1570-1584

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DOI: 10.1080/00343404.2017.1415429

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