How significant are fiscal interactions in designing federations?: 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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The economics literature has traditionally advocated that “governments compete”, and hence one should expect non-negligible fiscal interactions between and among different levels of government. This paper uses meta-regression analysis to quantify the size of inter-jurisdictional fiscal interactions and to explain the heterogeneity in empirical estimates. Our results suggest several robust findings. First, government level matters in influencing the extent of fiscal interactions. We find a non-monotonic relationship with much stronger interactions among municipalities and nations than among states. Second, horizontal tax interactions are, in general, stronger than expenditure interactions and vertical tax interactions, though this varies from country to country. Third, both tax competition and yardstick competition are supported by the data, though the former appears to produce stronger interactions than the latter. Fourth, capital controls, voter turnout and the extent of decentralization all shape fiscal interactions. Political competition and fiscal decentralization both increase horizontal tax competition and they decrease vertical tax competition. Finally, much of the variation between estimates can be explained by econometric specification and estimation strategies.

Keywords: fiscal interdependence; meta-regression; strategic interactions; tax competition; intergovernmental competition (search for similar items in EconPapers)
JEL-codes: H5 H73 R1 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011-05-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://eprints.lse.ac.uk/37535/ Open access version. (application/pdf)

Related works:
Journal Article: Does Inter-jurisdictional Competition Engender a “Race to the Bottom”? A Meta-Regression Analysis (2015)
Working Paper: How Significant are Fiscal Interactions in Federations? A Meta-Regression Analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:37535

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