Horizontal competition in multilevel governmental settings

Governments situated on the same level of a multi-level governmental system compete with each other as well as with governments placed higher or lower. This paper is concerned with horizontal competition only. It discusses both competition based on the mobility of agents and competition based on comparisons of performance across jurisdictions i.e., yardstick competition. With regard to the first kind, the focus is on the capacity of governments and voters to decide policies in spite of the mobility of agents. Some attention is also given to non-standard mechanisms in which mobility is manipulated so as to change the structure of the electorate. The paper considers two forms of horizontal yardstick competition, one (‘bottom-up’) in which comparisons are made by voters, the other (‘top-down’) in which they are made by some authority higher up in a hierarchy. The second form is analyzed in the context of a more general discussion of horizontal competition acknowledging the existence of several levels of government, in particular the international one. JEL classification: D72, H70, H77