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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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    1. Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
    2. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(2), pages 269-304, June.
    3. George R. Zodrow & Peter Mieszkowski, 2019. "Pigou, Tiebout, Property Taxation, and the Underprovision of Local Public Goods," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 17, pages 525-542, World Scientific Publishing Co. Pte. Ltd..
    4. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
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    7. Assaf Razin & Efraim Sadka (ed.), 1987. "Economic Policy in Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-18584-9, March.
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