Intergovernmental Competition Research Articles

Competitive federalism, individual autonomy, and citizen sovereignty

AbstractThe paper examines the theory of competitive federalism, focusing specifically on Hayek's and Buchanan's significant contributions to this theory. Looking at the rivalry between sub‐units in federal systems and drawing an analogy between market competition and intergovernmental competition, the theory of competitive federalism stresses the critical role viable exit options play as operating force in both arenas. The principal claim argued for in this paper is that by exclusively focusing on exit in its territorial dimension, the theory of competitive federalism obfuscates the fact that “exit” can mean two critically different things in federal systems. It can mean exiting from the territory over which a government exercises its assigned authority, and it can mean exiting from a polity in the sense of giving up one's membership status in the respective community. The paper discusses the nature, the significance, and the implications of the difference between these two kinds of exit.

“Label” Competition: Field Theory Insights into Inter-Governmental Competition and Transformation Path Among Chinese Cities

Inter-governmental competition has always been a crucial area of exploration in understanding the behavior of governments. Against the backdrop of contemporary China, the development of the Internet and the increasing influence of communication media have brought to light the growing significance of “Labels” that encapsulate the internal functions, characteristics, or relative advantages of regions in assessing the capabilities of local governments. In this process, the creation and dissemination of urban “Labels” not only drive the new transformation path of inter-governmental competition but also contribute to the reform of the official construction of the capital structure and internal Habitus of urban government field. Based on Field theory, a systematic investigation is conducted on the urban “Labels” generated with the development and influence of the Internet and communication media. In-depth analysis of the logic of urban “Labels” generation reveals that the competitive strategy of urban governments is gradually shifting from the previous “clear distinction between Top-Down” mode to a comprehensive path of “integration of Top-Down and Bottom-Up.” At the same time, the evaluation mechanism has shifted from a single “indicator” evaluation to a more comprehensive judgment focusing on “events,” and the path has shifted from simple “competition” to “competitive cooperation” mode.

Pollution Transfer under Intergovernmental Competition: Suppression or Opportunity

In recent years, the Sustainable Development Goals have introduced a “race to the top” mechanism to complement the “race to the bottom” in local governance and have an impact on pollution. This study utilizes the environmentally oriented accreditation of National Civilized Cities as a policy shock and applies the PSM-DID method to identify the pollution-relocation effects among cities triggered by the competition in local governance. The results indicate that environmentally oriented intergovernmental competition leads to the transfer of industrial enterprises to non-accredited cities, resulting in a significant increase in their pollution emissions and industrial pollution intensity. This indicates that the competition in asymmetric local governance will lead to the transfer of pollution to backward regions, which hampers the overall implementation efficiency of national environmental policies. Furthermore, heterogeneity analysis reveals that the impact is more significant for cities in the central and western regions. Being nominated for the National Civilized City accreditation helps to inhibit the influx of polluting enterprises. Cities that are not part of integrated environmental regulatory regions show a more pronounced increase in pollution emissions compared to other cities, indicating that symmetric local government environmental regulations and environmental collaborative governance contribute to restraining pollution transfer.

Competition and Local Government's Choice Between Informal and Formal Collaborative Mechanisms: Measuring Dyadic Intercity Competition Through the Lens of Business Trade-Offs

Informal and formal collaborative mechanisms are distinctive self-governing strategies that local governments use to mitigate intergovernmental collaboration risks. Studies on local governance have long argued that both mechanisms tend to co-occur and appear mutually complementary. However, extant research drawing on the transaction cost perspective provides a more nuanced and different explanation that as intergovernmental competition increases, local governments lean toward the choice of a formal mechanism over an informal mechanism to effectively address higher collaboration risks. Through a network lens, this study empirically tests the latter view. Using the Orlando metropolitan area as a testbed, Multiple Regression Quadratic Assignment Procedure tests reveal that the use of both collaborative mechanisms is positively associated with the level of intergovernmental competition. However, different from the initial expectation, local governments are more likely to engage in the informal mechanism rather than the formal mechanism as the competition level increases. In doing so, this study developed a new measurement strategy for intergovernmental competition to test the dyadic network-related research hypotheses. The measurement strategy and the research findings should inform future research on intergovernmental relations and local government network management.

Can vertical environmental regulation become a sharp weapon in China's green development process? The moderating role of pollution dividend.

Optimizing the vertical environmental regulation (VER) effect of the central government and reducing the negative execution motivation of local governments have become the priority points to accelerate the green development of China. Based on the spatial Durbin model, this paper not only examines the influence of VER on green development efficiency (GDE), but also discusses the moderating effect of politically and economically motivated pollution dividend (PPD and EPD) on the relationship between them. The research results are as follows: (1) VER has a U-shaped effect on local GDE, the green governance effect of which began to appear when VER was higher than 1.561. VER has an inverted N-shaped effect on adjacent GDE. When the VER intensity lies in (0.138, 3.012), it has a positive spatial spillover effect. (2) PPD weakens the local green governance effect of VER, while EPD positively moderates it. Both of them have no significant moderating effect on it in neighboring areas. (3) Cross-regional cooperative governance moderates the short-term weakness and pollution transfer of VER, and generally facilitates the positive moderating effect of PPD and EPD. In China's two major economic belts, VER, PPD and EPD also have different performances. This study proves the important influence of local inter-governmental competition and promotion tournament on the central environmental regulation for the first time, which is of great significance for optimizing the top-level design of the central government and implementing the governance responsibility of local governments.

The impact of fiscal decentralization and intergovernmental competition on the local government debt risk: Evidence from China

Based on the data of explicit debt and implicit debt of local governments in China from 2012 to 2020, this paper theoretically analyzes and empirically tests the spatial correlation effect of fiscal decentralization and intergovernmental competition on local government debt risk. It’s found that local government debt risk has obvious inertia effect in time and positive spatial correlation effect in space, and local fiscal spending decentralization and intergovernmental competition have a significant positive impact on the local government debt risk, as well as a positive spatial spillover effect. The research of this paper has very important policy implications for perfecting China’s decentralization system, standardizing the competition among governments, and preventing and defusing local government debt risks.

Reexamining the Environmental Kuznets Curve in Chinese Cities: Does Intergovernmental Competition Matter?

Since China's central authority began enforcing the environmental target responsibility system and introduced environmental indicators to the official ranking tournament in 2007, an ecological transformation has emerged in the intergovernmental competition (IGC) among localities. Because the extant literature on the environmental Kuznets curve (EKC) remains unclear regarding how that ecological IGC transformation changes the EKC economy-pollution correlation, this research investigates the degree to which the transformed IGC changes the form of the EKC, and how that altered EKC varies for different pollutants (i.e., SO2 and CO2) and in different regions (i.e., the eastern, central, and western regions). The results demonstrate a consistently inverted U-shaped relationship between income and SO2 emissions in all three regions, whereas when CO2 emissions are taken as the pollution indicator, the EKC hypothesis holds only in the eastern and central cities, and a positive linear income-CO2 nexus is found in the western region. Spatial analysis reveals that whereas the IGC flattens the inverted U-shaped curves between income and SO2 emissions, it has led to a higher economic cost, corresponding to the turning point of the EKC for CO2 emissions. The findings indicate that the ecological transformation of the IGC has facilitated a positive up-down yardstick competition in the strategic interactions of sustainable development across local Chinese governments, which can lead to a kind of balance between centralization and decentralization by inspiring local officials' adaptability and activity in reducing pollutant emissions and strengthening the officials' responsiveness to performance rankings. This study elucidates the environmental impacts of IGC in China and provides an institutional explanation for the strategic interactions among local governments when they are tackling the environment-economy nexus under multitask conditions.

Effects of Local Government Behavior on University–Enterprise Knowledge Flow: Evidence from China

Government financial investment has been increasingly adopted as a policy support to stimulate university–enterprise cooperation, however, empirical research from the perspective of knowledge flow remains limited. We reason that school–enterprise knowledge flow can be divided into dual stages, namely, knowledge creation and knowledge transfer, and this dual efficiency can be measured with the super-efficiency DEA model. The results show that the average value of knowledge creation efficiency (KCE) is higher than knowledge transfer efficiency (KTE). We adopt the Dynamic Generalized Spatial Model method to study the effect of government support on knowledge flow dual efficiency, and the regression results show that government support has a nonlinear effect on KCE while having a positive impact on KTE. We find that intergovernmental competition has a moderating influence on the relationship between government support and dual efficiency. Fiscal transparency can enhance the moderating effect of intergovernmental competition.

Determining Existence of Three-Dimensional Intergovernmental Competition: Spatial Econometric Analysis Based on China’s Land-Leasing Behavior

Determining Existence of Three-Dimensional Intergovernmental Competition: Spatial Econometric Analysis Based on China’s Land-Leasing Behavior

Fiscal Decentralization, Green Technology Innovation, and Regional Air Pollution in China: An Investigation from the Perspective of Intergovernmental Competition.

Fiscal decentralization (FD), as an institutional arrangement for the fiscal division between central and local governments, gives local governments the enthusiasm and autonomy to provide public products and services. With the dominance of environmental governance, how local governments can avoid intergovernmental “race to the bottom” issues through green technology innovation (GTI) is a matter of regional green development and continuous improvement of atmospheric environmental quality. Based on a sample of 30 provinces in China from 2003 to 2018, this paper uses the spatial Durbin model (SDM) to examine the relationship between FD, GTI, and regional air pollution and explores their spatial spillover effect and regional heterogeneity from the perspective of intergovernmental competition. The results indicate that the FD and GTI in various provinces had significant and regionally differentiated inhibitory effects on local air pollution. In Western China, due to the regional competition among local governments in terms of economic development, economic development-oriented fiscal expenditures crowd out environmental governance-oriented fiscal expenditures, which has led to the consequence that FD can intensify local air pollution and has a positive spillover effect, but the demonstration effect of green technological innovation can well moderate the effect of FD on air pollution. FD in the eastern region has played a positive role in promoting regional air quality improvement. However, its green technological innovation has not played a positive role in reducing emissions, and it plays a significant negative regulatory role in the emission reduction effect led by FD. Finally, the article puts forward policy recommendations in terms of a fiscal decentralization system, green technological innovation, and performance evaluation mechanism.

The Influence of Land Disposition Derived from Land Finance on Urban Innovation in China: Mechanism Discussion and Empirical Evidence.

As China’s economy advances into a new stage of high-quality development driven by scientific and technological innovation, it is of great practical importance to probe what effects land disposition, which underpinned the previous round of rapid economic growth, and may have an exertion on developing innovation. Based on a deep exploration of the potential positive and negative influences of land disposition in relation to the effects of land finance on urban innovation, we employed a dynamic spatial Durbin model, along with panel data from 266 Chinese prefecture-level cities over the period 2004–2017. The empirical results show that the development of China’s urban innovation has had significant path dependence, spatial agglomeration, and inhibiting effects on neighboring cities, and these effects are attributed to inter-governmental competition and the Matthew effect. Overall, the combined impacts of land disposition modes on urban innovation have changed, from facilitative in the early stage to inhibitory at present. In the developed cities of east China, the facilitative effect of land disposition has weakened gradually, and tends to disappear entirely, while the change in impact over time in less developed mid-western cities is consistent with the national sample. This study broadens our understanding of the role of land disposition in China’s urban innovative development and has meaningful direct implications for policymakers.

Intergovernmental competition, industrial spatial distribution, and air quality in China

As clean air is a public good, local governments play an irreplaceable role in environmental protection. This study examines how intergovernmental competition affects air quality in China. The results reveal that intergovernmental tax competition increases regional sulfur dioxide and haze emissions and worsens regional air quality, while competition in infrastructure investment does not have such effects. Furthermore, tax competition will affect air quality through industrial spatial distribution. Intergovernmental competition attracts low-technical content capital flowing into where it is more aggressive, triggering a “race to the bottom” effect on industrial structure and attracting similar industries through an agglomeration economy. On this basis, this study uses the Spatial Durbin model to test the spatial impact of intergovernmental competition on air quality. The effects are manifested in two forms: pollution spillover and pollution transfer. Pollution spillover has a major effect on the air quality of neighboring regions at close geographical distances, while pollution transfer is mainly responsible for the air quality of regions with similar levels of economic development. The relocation of capital and industries between regions due to intergovernmental competition causes the spillover and transfer effects on air quality. In addition, this study analyzes the regulatory effect of fiscal decentralization and environmental regulation on the impact of intergovernmental competition on air quality.

Tax competition and political agency problems

AbstractWe study how politicians' reputation concerns affect taxation in the presence of intergovernmental competition. To this end, we construct a two‐country asymmetric tax competition model in which the residents in one of the two countries face a domestic political agency problem: the residents do not know whether the incumbent politician is benevolent or leviathan. To separate themselves from leviathan politicians and attract voters’ support, benevolent politicians argue for excessively low taxation, which can be regarded as anti‐taxation populism. This anti‐taxation populism exhibits the following two properties. First, the populist country's low production technology relative to the other country facilitates the emergence of anti‐taxation populism. Second, anti‐taxation populism can improve welfare in terms of either the populist country or the whole world, depending on the asymmetry of the production technology.

Effect of private capital in rival projects on public-private partnership adoption in China

ABSTRACT This study analysed how local governments react to intergovernmental competition for private capital in the public goods market. Using microlevel data for public-private partnership (PPP) projects in China from 2012 to 2018, we found that the more private capital rival cities have attracted, the more likely local governments start to introduce PPP projects, especially those whose future returns are paid by governments. The results are robust to an instrumental variable estimation using the financing demand of rival cities. The effect of rival projects was found to be related to information disclosure, financing facilitation, and governors’ responsibility. The results suggest that local governments tend to promise future obligations for payment to decrease advanced capital expenditures. This study also provides implications for political and economic research by shedding light on local competition in the progress of marketization.

Municipal Fragmentation and Local Financial Condition

A sizeable literature investigates how intergovernmental competition affects various fiscal outcomes in a fragmented local landscape. However, it remains untested how the fragmentation affects the outcomes simultaneously. This study addresses the issue by condensing individual outcomes into a multifaceted concept of financial condition. Utilizing a pooled cross-sectional time-series approach on the metropolitan statistical areas in the U.S between 1972 and 2017, this study tests how financial condition of municipalities varies by competition among them. The finding exhibit adverse effects on their financial condition when a greater number of municipalities is identified.

Infrastructure Public–Private Partnership (PPP) Investment and Government Fiscal Expenditure on Science and Technology from the Perspective of Sustainability

In the environment of the continuous development of the Public–Private Partnership (PPP) model, China’s “dual circulation” development pattern orientation and “new normal” economic development reform provide the foundation for the development of the PPP model in the field of infrastructure. A good government investment structure and governance environment will help to improve the financial sustainability of infrastructure investment. This paper studies the mechanism of the relationship between fiscal expenditure on science and technology and the development of infrastructure PPP models based on the data of provincial PPP projects in the World Bank database and carries out an empirical analysis. The results show that the positive effect of government fiscal expenditure on science and technology and the development of the infrastructure PPP model in local regions is significant. In addition, intergovernmental competition within the political system of China will have a restraining effect on this relationship. This has certain theoretical and practical significance for the construction and implementation of the mechanism underlying intergovernmental behavior and the infrastructure PPP model.

Poder político e desenvolvimento urbano em Salvador: tendências das últimas décadas

Este trabalho analisa a configuração do poder político em Salvador e suas vinculações com o desenvolvimento urbano da cidade. Busca-se compreender as relações intergovernamentais da prefeitura municipal com o governo do estado e suas relações com a coalizão de interesses privados dos chamados “capitais do urbano”. O artigo parte do processo de metropolização da cidade nos anos 70 e chega às transformações contemporâneas que, desde a década de 90, vem caracterizando Salvador como uma cidade voltada para um empresariamento urbano que aposta no turismo, na produção imobiliária e na realização de atividades lúdico-culturais. O trabalho se baseou em pesquisa bibliográfica e na coleta de informações em documentos, relatórios de gestão, jornais e revistas, peças publicitárias dos governos e discursos dos gestores. Os resultados ilustram os dilemas de uma cidade pobre e periférica cujo processo de desenvolvimento urbano esteve vinculado aos interesses de diversos capitais do urbano e de uma elite política regional. Atualmente a gestão urbana do município tem sido objeto de uma competição intergovernamental entre os poderes públicos municipal e estadual que, embora de coalizões político-partidárias distintas, operam dentro de lógicas semelhantes de intervenção, baseadas num amplo programa de empresariamento da gestão urbana.

Patterns of revenue distribution in rural residential land consolidation in contemporary China: The perspective of property rights delineation

Rural residential land consolidation (RRLC) in contemporary China refers to activities related to the replanning and reallocation of rural residential land to construct new rural residences, to increase land-use efficiency and to improve rural amenities in the context of rural revitalization. The objective of this study is to elucidate the patterns of revenue distribution in RRLC by addressing the following questions. Given incomplete and ambiguous formal rules in China, how can rural land property rights be delineated to distribute and coordinate interests among stakeholders in RRLC? Furthermore, what are the factors that determine the delineation of rural land property rights to distribute land revenue? A theoretical framework for the delineation of rural land property rights is developed from the perspectives of the institutional environment, governance and resource allocation. A comparative analysis of two typical cases of RRLC in contemporary China is conducted to support the research hypotheses. This study finds that bargaining power is the fundamental determinant of delineating rural land property rights to distribute revenue in RRLC. Furthermore, intergovernmental competition motivates the local government to fully deploy strong bargaining power, while concerns about social stability provide some constraints. A strong capability for collective action reinforces the bargaining power of rural households. This study provides new insights into the delineation of rural land property rights and subsequent revenue distribution based on distinctive institutional settings and RRLC in China, enriching the theoretical and empirical findings in the property rights school. Policy recommendations on revenue sharing of RRLC are proposed accordingly.

Is the Urban Shrinkage Inhibits the Improvement of Public Service Level?

Public services provide convenient conditions for urban residents to study,work and live, and have important significance for improving the lifequality of residents and improving the level of welfare. However, whileChina’s spatial economic is heading towards agglomeration development,a large number of cities have shrunk, which has made unbalanced supplyof public services between regions increasingly prominent. Based on theexisting literature and the development reality, this paper analyzes theimpact of urban shrinkage on the public service level from the publicservice supply mechanism, and discusses the heterogeneous effects ofdifferent labor shrinkage on public services. The results of the study showthat urban shrinkage will inhibit the improvement of public service level,but inter-governmental competition makes the labor shrinkage of industryand service industry promote the improvement of public service level. Inaddition, this paper takes economic development level as a moderatingvariable to study the moderating effect of economic development level inthe impact of urban shrinkage on public service levels. It is found that thereduction of economic development level will promote government competition and provide more public services.

Intergovernmental competition for donations: The case of the Furusato Nozei program in Japan

This paper shows that municipalities compete excessively for donations under a unique program called Furusato Nozei (Tax payment to hometown) in Japan. Under the program, people make donations to their favorite municipalities and municipalities that have received donations give reciprocal gifts in return. This causes governments to compete for donations by setting “return rates” — the value of a gift as a percentage of the donation received. Our estimates show that, in the most likely case, this competition reduces net revenue by at least 7.5% compared to when the municipalities do not compete for donations.