Borders as boundaries to fiscal policy interactions? An empirical analysis of politicians' opinions on rivals in the competition for firms

Benny Geys and Steffen Osterloh ()

Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" from WZB Berlin Social Science Center

Abstract: Studies of spatial policy interdependence in (local) public policies usually concentrate on the relations between jurisdictions within a single analysed region, and disregard possible extra-regional effects. However, the theoretical spatial statistics literature shows that biased estimates might emerge if spatial interactions extend beyond the boundaries of the available data (i.e., the boundary value problem). This paper empirically assesses the practical relevance of this concern by studying German local politicians' assessments of their jurisdictions' main competitors in the struggle to attract firms. We find that location near a border significantly undermines politicians' perception that the fiercest competitive pressure derives from jurisdictions within their own state. This effect sets in about 20km (10.2km) from a national (international) border. These results indicate that nearest municipalities perceive each other as competitors regardless of the state or country where they are located, which has important implications for estimating spatial dependence models.

Keywords: government interaction; boundary value problem; border effects; policy interdependence (search for similar items in EconPapers)
JEL-codes: D24 D60 H71 H72 (search for similar items in EconPapers)
Date: 2012
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Related works:
Journal Article: BORDERS AS BOUNDARIES TO FISCAL POLICY INTERACTIONS? AN EMPIRICAL ANALYSIS OF POLITICIANS’ OPINIONS ON RIVALS IN THE COMPETITION FOR FIRMS (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbfff:spii2012113

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