How significant is yardstick competition among governments? Three reasons to dig deeper

The significance of yardstick competition among governments is now confirmed with regard to fiscal variables. This is an important result but the significance of the mechanism must also be sought in a context broader than that of fiscal federalism and without limitation to relations and processes fully observable. Three points are made. Even in the case of governments trying to mimic each other over a single variable, additional variables are involved in an important way. Yardstick competition can be latent without being ineffective. Its major effect, then, is to set bounds to the choices that office-holders could think of making. Finally, the mechanism is a hidden albeit essential component of the political and economic system, which would look quite different if voters could not make comparisons across jurisdictions and there were thus no yardstick competition, even of the latent variety.