Does Competition Tame the Leviathan? A Case of Earmarked Spending for Transportation

Abstract

Extant studies have explored the Leviathan hypothesis whether competition across governments enhances efficiency. This study empirically estimates the Leviathan hypothesis in the context of earmarked spending on transportation and competition in California. This study first obtains an efficiency score for empirical procedures employing the Malmquist productivity index and further the Tobit regression model to examine the Leviathan hypothesis. The findings provide evidence that competition of local (option) sales tax improves efficiency in transportation spending. The findings verify that efficiency becomes lower in a county that levies local (option) sales tax earmarked for transportation because transportation spending increases.