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Welfare Benefits In Highly Decentralized Fiscalsystems: Evidence On Interregional Mimicking, Luis Ayala, Ana Herrero, Jorge Martinez-Vazquez

ICEPP Working Papers

This paper analyzes the determinants of welfare benefit levels within a highly fiscally decentralized context. More specifically, we analyze the role of mimicking as a driver of the institutional design of subnational government policies in the absence of federal co-ordination and financing. Empirically, we focus on the welfare benefit programs of Spanish regional governments during the period 1996-2015. Our results strongly support the significant role played by mimicking: regional public agents observe what their peers are doing and act accordingly, and this holds even in a context of low mobility of households.