City Government Expenditures and City Government Reality: A Comment on Sjoquist/Reply and Comment

David Sjoquist (1982) has argued that local governments will decrease their expenditures in response to possible migration of their tax base. He has also contended that, as the extent of this competition increases as the number of jurisdictions rises, the level of expenditures will fall as the number of jurisdictions increases. However, Sjoquist's model ignores fiscal realities which result from the interaction of overlying governments, making his results doubtful. Sjoquist acknowledges the shortcomings of his model and reestimates regression equations after making the necessary adjustments. Although the values of the coefficient change, the coefficients are of the same sign and statistically significant. Shortcomings in Palumbo's model and the different set of data used by Palumbo are responsible for the variance in results.