Are Spending Patterns of Local Government Interdependent?: Strategic Interactions of U.S. Local Governments in California
DOI:
https://doi.org/10.4335/17.1.121-137(2019)Keywords:
strategic interaction, neighborliness, fiscal autonomy, yardstick competition modelAbstract
This study examines if a local government’s policies depend on that of similarly situated counties, called “neighborliness,” by analyzing the panel data of county governments in California from 2001 to 2014. In our study, the results show that the spending pattern of a local government is positively influenced by neighboring governments that are similar in terms of personal income and geographic proximity, whereas racial similarity does not work as a “neighboring” characteristic. Local governments benchmark the policies or programs of other neighboring governments, as they might face similar policy issues based on similar economic and environmental conditions. Interestingly, we also find that the degree of mimicking behavior depends on fiscal autonomy.
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