Overlapping jurisdictions and demand for local public services: does spatial heterogeneity matter?

Marie-Estelle Binet (), Alain Guengant and Matthieu Leprince ()
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Alain Guengant: University of Rennes 1 - CREM, (UMR 6211 CNRS)

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: This paper aims to test the existence of vertical interactions in terms of public spending between overlapping local jurisdictions in France using a data set of 110 French municipalities and their corresponding departments in 2001 and 2005. To do so, we consider that demand for municipal services is conditioned by the services provided by departments. We then estimate two specifications which allow spatial heterogeneity to be modeled and which are compared with a simple spatial error specification (without spatial heterogeneity). The two estimated spatial regimes models are able to eradicate spatial autocorrelation in the error term. The estimation results show that an appropriate consideration of spatial heterogeneity can lead to new insights. The spatial error specification reveals a robust complementary demand relationship between services provided by departmental and municipal governments. However, these results are not in accord with the results produced by the spatial regime models, which provide evidence of heterogeneity with independence, complementarity or substitution between the services offered by the two overlapping jurisdictions.

Keywords: Local public expenditures; Overlapping jurisdictions; Spatial heterogeneity; Spatial econometrics (search for similar items in EconPapers)
JEL-codes: C21 H72 H77 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-geo and nep-ure
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Related works:
Working Paper: Overlapping Jurisdictions and Demand for Local Public Services: Does Spatial Heterogeneity Matter? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:201213

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