Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: Theoretical models of strategic interaction among local governments are often empirically implemented by the use of spatial econometric techniques. This paper deals with the de…nition of the elements in the spatial weights matrix W in empirical models of strategic interaction among local jurisdictions. In particular, we present empirical evidence that a de…nition based on relative population between jurisdiction i and j can serve as an approximation of the inhabitants living in jurisdiction i's interest of political issues in jurisdiction j. This information could preferable be used in spatial econometric models either testing or controlling for yardstick competition across jurisdictions.

Keywords: Spatial econometrics; yardstick competition

JEL-codes: C21; H72; H76; H77; R50

12 pages, October 17, 2011

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