Horizontal competition among governments

Abstract

Governments situated on the same level of a multi-level governmental system compete with each other as well as with those placed higher or lower. This paper is concerned with horizontal competition only. It discusses both competition based on the mobility of agents (individuals, business firms, or factors) and competition related to the circulation of information. With regard to the first kind, it focuses on the capacity that governments keep to decide their policies and compete in spite of the mobility of agents. Some attention is also given to the implications of some non-standard assumptions about the underlying political setup. The discussion of information-based competition includes that of “laboratory federalism” (whether decentralization favours innovation) and of “yardstick competition” (what are the effects of comparisons of governments’ comparative performance across jurisdictions). Some questions pertaining to the relationship between the different forms of horizontal competition and to their normative and empirical dimensions are addressed briefly.