When Does Inter-Jurisdictional Competition Engender a "Race to the Bottom"? A Meta-Regression Analysis

Joan Costa-i-Font, Filipe De-Albuquerque and Hristos Doucouliagos
Authors registered in the RePEc Author Service: Joan Costa-i-Font

No 5212, CESifo Working Paper Series from CESifo

Abstract: A growing literature documents the existence of strategic political reactions to public expenditure between rival jurisdictions. These interactions can potentially create a downward expenditure spiral (‘race to the bottom’) or a rising expenditure spiral (‘race to the top’). However, in the course of identifying the existence of such interactions and ascertaining their underlying triggers, the empirical evidence has produced markedly heterogeneous findings. Most of this heterogeneity can be traced back to study design and institutional differences. This paper contributes to the literature by applying meta-regression analysis to quantify the magnitude of strategic inter-jurisdictional expenditure interactions, controlling for study and institutional characteristics. We find several robust results beyond confirming that jurisdictions do engage in strategic expenditure interactions, namely that strategic interactions: (i) are weakening over time, (ii) are stronger among municipalities than among higher levels of government, and (iii) appear to be more influenced from tax competition than yardstick competition, with capital controls and fiscal decentralization shaping the magnitude of fiscal interactions.

Keywords: inter-jurisdictional competition; yardstick competition; meta-regression; expenditure competition (search for similar items in EconPapers)
JEL-codes: H10 H50 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: When does inter-jurisdictional competition engender a "race to the bottom"?: a meta-regression analysis (2015)
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