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Expenditure Competition

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  • John Douglas Wilson
  • Roger H. Gordon

Abstract

Given the temptation by government officials to use some of their budget for “perks,” residents face the problem of inducing officials to reduce such “waste.” The threat to vote out of office officials who perform poorly is one possible response. In this paper, we explore how the competition for residents induced by fiscal decentralization affects “waste” in government. We find that such competition reduces waste, raises the utility of residents, and increases the desired supplies of public goods (potentially above the levels that jurisdictions would choose if they could coordinate). These results are in sharp contrast to the presumed effects from “tax competition,” and suggest an additional advantage of fiscal decentralization.

Suggested Citation

  • John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, April.
    • Handle: RePEc:bla:jpbect:v:5:y:2003:i:2:p:399-417
    DOI: 10.1111/1467-9779.00139
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    References listed on IDEAS

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