| Abstract |
This study has identified and organized the major trends of recent studies on strategic interaction in public expenditure among subnational neighboring governments around the world. Expenditure spillo...vers, yardstick competition, fiscal competition are three principal determinants of local governmentsʼ spending interactions in the study sample, among inter-government cooperation, political ideology, and social learning. We also present appealing notes on particular cases of interdependence in deciding budget allocation. This study finds a lack of applied work on spending interaction of neighboring localities in developing countries and almost none of the similar research in the least developed countries. There is still a lack of comparative studies on strategic spending interactions at national, regional, and local levels. Finally, it is promising to use additional sources of exogenous variation for the identification of spatial fiscal interaction effects in a quasi-experimental approach.show more
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