The Identification of the Financial Competition of Local Governments in Xia Zhang Quan Metropolitan Area: Does “the Horizontal Strategic Interaction” Coexist with “the Vertical Common Action”?

Shanshan LIU, Lin MU, Lingrui LIU


Using the spatial autoregressive model and spatial error correlation model, we have an empirical test on the financial competition of the 19 local governments in Xia Zhang Quan metropolitan area to identify the characteristics of “the horizontal strategic interaction” behavior and “the vertical common action” behavior. The results of our study show that the characteristics of interaction in the relative size of tax, the relative size of expenditure, the expenditure for capital construction and the expenditure on education of the 19 local governments are in the tactics of mutual mimicking. And in the characteristics of the vertical common action, the 19 local governments have followed the government of Fujian province in the tree policies of the relative size of tax, the relative size of expenditure and the expenditure on education. However, considering the endogencity of the policy of Fujian province government, “the Horizontal Strategic Interaction” behaviors of financial policies are not robust and the policy of the province government has stronger impact on the ones of the 19 local governments.

Key words: Xia Zhang Quan metropolitan area; Financial competition; The horizontal strategic interaction; The vertical common action; Spatial panel models


Xia Zhang Quan metropolitan area; Financial competition; The horizontal strategic interaction; The vertical common action; Spatial panel models

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