Expenditure Competition

22 Pages Posted: 24 Mar 2001 Last revised: 7 Dec 2001

See all articles by Roger H. Gordon

Roger H. Gordon

University of California, San Diego (UCSD) - Department of Economics; Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

John D. Wilson

Michigan State University - Department of Economics

Date Written: March 2001

Abstract

Given the temptation on 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 the effect that competition for residents induced by fiscal decentralization has on 'waste' in government. We find not only that such competition reduces waste and raises the utility of residents, but also that it should increase the desired level of public expenditures, and to a point above the level that jurisdictions would choose if they could coordinate. These results are in sharp contrast to the presumed effects from such 'tax competition,' and suggest an additional advantage of fiscal decentralization.

Suggested Citation

Gordon, Roger H. and Wilson, John D., Expenditure Competition (March 2001). NBER Working Paper No. w8189. Available at SSRN: https://ssrn.com/abstract=264444

Roger H. Gordon (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
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858-534-4828 (Phone)
858-534-7040 (Fax)

Harvard University - Department of Economics ( email )

Littauer Center
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John D. Wilson

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

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