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How significant are fiscal interactions in designing federations?: a meta-regression analysis

Costa-i-Font, Joan, De-Albuquerque, Filipe and Doucouliagos, Hristos (2011) How significant are fiscal interactions in designing federations?: a meta-regression analysis. Political science and political economy working papers, 6/2011. London School of Economics, London, UK.

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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.

Item Type: Monograph (Working Paper)
Official URL: http://www2.lse.ac.uk/government/research/resgroup...
Additional Information: © 2011 The Authors
Library of Congress subject classification: H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System: H - Public Economics > H5 - National Government Expenditures and Related Policies
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H73 - Interjurisdictional Differentials and Their Effects
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics
Sets: Departments > European Institute
Departments > Social Policy
Collections > Economists Online
Research centres and groups > LSE Health
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 6/2011
Date Deposited: 21 Jul 2011 13:11
URL: http://eprints.lse.ac.uk/37535/

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