Public spending interactions and local politics. Empirical evidence from French municipalities

This paper aims at testing whether there exist spending interactions between French municipalities by estimating a dynamic panel data model. Our results suggest that there are some interactions between neighbouring municipalities as regards primary and investment expenditures. A positive relationship between municipalities’ wage bill and unemployment rates is likely to stress a rise of temporary employment in those municipalities that suffer from social troubles. Further, the estimation results show that these interdependences also exist between cities whose mayors have the same partisan affiliation. Finally, our results confirm the opportunistic behaviour of local governments, which increase all categories of public spending in pre-electoral periods