Federal Competition and Economic Growth

John William Hatfield and Katrina Kosec
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John William Hatfield: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: We examine the question of how competition between governments within metropolitan areas affects economic growth outcomes. Using data on metropolitan statistical areas (MSAs) in the United States, we find that the number of county governments is significantly and positively correlated with the average annual growth rate of income per employee over 1969-2006. Exploiting exogenous variation in the natural topography of our MSAs to instrument for the number of county governments, we find evidence supporting a causal interpretation of the effect of inter-jurisdictional competition on economic growth. Furthermore, our estimates suggest that not accounting for the endogeneity of inter-jurisdictional competition may lead to systematic underestimation of its growth-enhancing benefits. A natural question is whether our findings merely reflect some form of reversion to the mean. Quite to the contrary, we find that higher inter-jurisdictional competition was already associated with higher income in 1969, and that the disparity only grew over the intervening 37 years.

JEL-codes: H11 H77 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Federal competition and economic growth (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:2038

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