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Political cycles, spatial interactions and yardstick competition: evidence from Italian cities
[The tax gradient: spatial aspects of fiscal competition]

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  • Massimiliano Ferraresi

Abstract

I aim to identify the presence of spatial interactions among local governments by exploiting a novel strategy. Specifically, I take advantage of the political cycle of Italian municipalities over the period of 2001–2011 to isolate the effect of the spending decisions of one municipality on neighboring municipalities. The results of this analysis point to the presence of strategic interactions between neighboring municipalities and indicate that such fiscal behavior is more pronounced during electoral years compared to non-electoral ones, when municipalities are governed by coalitions backed by a small majority, and in cities guided by a mayor who can run for re-election. Taken together, these results suggest that the observed spatial dependence in spending decisions seems to be consistent with the yardstick competition hypothesis.

Suggested Citation

  • Massimiliano Ferraresi, 2020. "Political cycles, spatial interactions and yardstick competition: evidence from Italian cities [The tax gradient: spatial aspects of fiscal competition]," Journal of Economic Geography, Oxford University Press, vol. 20(4), pages 1093-1115.
    • Handle: RePEc:oup:jecgeo:v:20:y:2020:i:4:p:1093-1115.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbz036
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    Citations

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    Cited by:

    1. Massimiliano Ferraresi & Massimiliano Mazzanti & Matteo Mazzarano & Leonzio Rizzo & Riccardo Secomandi, 2020. "Political cycles and yardstick competition in the recycling of waste. Evidence from Italian provinces," Working papers 93, Società Italiana di Economia Pubblica.
    2. Ferraresi Massimiliano, 2021. "Political Budget Cycle, Tax Collection, and Yardstick Competition," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(3), pages 1149-1161, July.
    3. Ferraresi, Massimiliano & Gucciardi, Gianluca, 2022. "Political alignment, centralisation, and the sense of government unpreparedness during the COVID-19 pandemic," European Journal of Political Economy, Elsevier, vol. 73(C).
    4. Ferraresi, Massimiliano, 2023. "JUE Insight: Immigrants, social transfers for education, and spatial interactions," Journal of Urban Economics, Elsevier, vol. 136(C).
    5. Collazos-Ortiz, María Antonieta & Wong, Pui-Hang, 2024. "The effects of resource rents and elections on human capital investment in Colombia," Resources Policy, Elsevier, vol. 89(C).
    6. Wang, Lingxiao & Zheng, Yuqing, 2024. "Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    7. Massimiliano Ferraresi & Leonzio Rizzo & Riccardo Secomandi, 2021. "Electoral incentives, investment in roads, and safety on local roads," Working papers 107, Società Italiana di Economia Pubblica.
    8. Tao, Peng & Gong, Feng & Zhu, Kaiyue, 2023. "Tax competition among local governments: Evidence from the spillovers of location-based tax incentives in China," China Economic Review, Elsevier, vol. 82(C).
    9. Federico Revelli & Tsung-Sheng Tsai & Roberto Zotti, 2021. "Fiscal Externalities in Multilevel Tax Structures: Evidence from Concurrent Income Taxation," CESifo Working Paper Series 9276, CESifo.
    10. Leonzio Rizzo & Massimiliano Ferraresi & Riccardo Secomandi, 2021. "Electoral incentives, investment in roads, and safety on local roads," Working Papers 20210710, University of Ferrara, Department of Economics.

    More about this item

    Keywords

    Spatial interactions; yardstick competition; political budget cycle; local spending;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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