Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in Spain

Albert Solé Ollé ()
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Albert Solé Ollé: Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB)

No 2005/3, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: The paper presents a framework for measuring spillovers resulting from local expenditure policies. We identify and test for two different types of expenditure spillovers: (i) "benefit spillovers", arising from the provision of local public goods, and (ii) "crowding spillovers", arising from the crowding of facilities by residents in neighboring jurisdictions. Benefit spillovers are accounted for by assuming that the representative resident enjoys the consumption of a local public good in both his own community and in those surrounding it. Crowding spillovers are included by considering that a locality's consumption level is influenced by the population living in the surrounding localities. We estimate a reaction function, with interactions between local governments occurring not only between expenditure levels, but also between neighbors' populations and expenditures. The equation is estimated using data on more than 2,500 Spanish local governments for the year 1999. The results show that both types of spillovers are relevant.

Keywords: Budget spillovers; Local expenditures; Spatial econometrics (search for similar items in EconPapers)
JEL-codes: D24 H49 H72 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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