How significant are fiscal interactions in 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: A large literature examines government fiscal interactions in federations. However, the empirical evidence is scattered and inconclusive, especially with respect to the size of interactions, as well as the institutional and economic determinants underpinning them. This paper uses meta-regression analysis to quantify the size of these inter-jurisdictional fiscal interactions and to explain the heterogeneity in empirical estimates. First, we find significantly stronger interactions among municipalities and nations than among intermediate levels of government. Second, tax interactions are, in general, stronger than expenditure interactions, and horizontal tax interactions appear to be stronger than vertical interactions. Third, both tax competition and yardstick competition are supported by the data, though the former appears to produce stronger interactions. Fourth, capital controls, voter turnout and the design 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 country heterogeneity, differences in econometric specification and estimation strategies.

Keywords: fiscal interactions; meta-regression; inter-governmental competition; yardstick competition (search for similar items in EconPapers)
JEL-codes: H5 H73 R1 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://eprints.lse.ac.uk/37536/ Open access version. (application/pdf)

Related works:
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:37536

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