arXiv 21 Nov 2024 · Econometrics
arXiv:2411.13810 · PDF · DOI · OpenAlex · Extracted main text
This paper introduces a novel spatial interaction model to explore the decision-making processes of a resource allocator and local agents, with central and local governments serving as empirical representations. The model captures two key features: (i) resource allocations from the allocator to local agents and the resulting strategic interactions, and (ii) local agents' multiple activities and their interactions. We develop a network game for the micro-foundations of these processes. In this game, local agents engage in multiple activities, while the allocator distributes resources by monitoring the externalities arising from their interactions. The game's unique Nash equilibrium establishes our econometric framework. To estimate the agent payoff parameters, we employ the quasi-maximum likelihood (QML) estimation method and examine the asymptotic properties of the QML estimator to ensure robust statistical inference. Empirically, we study interactions among U.S. states in public welfare and housing and community development expenditures, focusing on how federal grants influence these expenditures and the interdependencies among state governments. Our findings reveal significant spillovers across the states' two expenditures. Additionally, we detect positive effects of federal grants on both types of expenditures, inducing a responsive grant scheme based on states' decisions. Last, we compare state expenditures and social welfare through counterfactual simulations under two scenarios: (i) responsive intervention by monitoring states' decisions and (ii) autonomous transfers. We find that responsive intervention enhances social welfare by leading to an increase in the states' two expenditures. However, due to the heavy reliance on autonomous transfers, the magnitude of these improvements remains relatively small compared to the share of federal grants in total state revenues.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Yang, K. and Lee, L (2017) Identification and QML estimation of multivariate and simultaneous equations spatial autoregressive models | 0.941 | 6 | 4 | 83% |
| 2 | Knight, B (2002) Endogenous federal grants and crowd-out of state government spending: Theory and evidence from the federal highway aid program | 0.928 | 4 | 3 | 100% |
| 3 | Yang, K. and Lee, L (2019) Identification and estimation of spatial dynamic panel simultaneous equations models | 0.928 | 4 | 3 | 100% |
| 4 | Agrawal, D., Hoyt, W., and Wilson, J (2022) Local policy choice: Theory and empirics | 0.874 | 6 | 2 | 100% |
| 5 | Case, A., Rosen, H., and Hines, J (1993) Budget spillovers and fiscal policy interdependence: evidence from the states | 0.874 | 5 | 2 | 100% |
| 6 | Han, X. and Lee, L (2016) Bayesian analysis of spatial panel autoregressive models with time-varying endogenous spatial weight matrices, common factors, a… | 0.811 | 4 | 2 | 100% |
| 7 | Solé-Ollé, A (2006) Expenditure spillovers and fiscal interactions: Empirical evidence from local governments in spain | 0.811 | 4 | 2 | 100% |
| 8 | de Paula, A., Rasul, I., and Souza, P (2024) Identifying network ties from panel data: theory and an application to tax competition | 0.811 | 4 | 2 | 100% |
| 9 | Rothenberg, T. J (1971) Identification in parametric models | 0.737 | 4 | 3 | 50% |
| 10 | Baicker, K (2005) The spillover effects of state spending | 0.737 | 3 | 2 | 100% |
Showing the top 10 of 66 scored citations.