**Yardstick competition in Indonesia** – Arze del Granado, Martinez-Vasquez and Simatupang (2009) examine whether the so-called “Big Bang decentralization reform” which took place in 2001 in Indonesia has paved the way for fiscal competition among local governments. The main feature of the “Big Bang” reform was a massive devolution of responsibility to districts and, to a lesser extent, to provinces.  As a result, the share of local and provincial government in total government expenditure almost doubled before and after the reform. In East Asia, only China has more decentralized expenditures than Indonesia (though, as we note above, it might be exaggerated to call this ‘decentralization’ since subnational public expenditure autonomy is limited in Indonesia). Subnational governments have little autonomy with respect to taxation. Tax revenue sharing and transfers account for most subnational resources and the central government keeps all major tax sources. This study uses fiscal data on local districts for 2004 and estimates a spatial regression model. They try to sort out the different reasons for fiscal interaction in estimating an auxiliary equation (popularity of the incumbent in the case of yardstick competition or changes in tax bases in the case of tax competition). The study does not find evidence of tax competition, as expected, but finds evidence of yardstick competition among local districts on both tax and expenditure sides, suggesting that accountability mechanisms in decentralized developing countries may be reinforced by interjurisdiction competition in terms of local governance performance.

**Interactions in public expenditures in Bénin** .  Rota-Grazziosi and Foucault (2010) test for the existence of strategic spending interactions between Beninese local governments using a spatial panel dataset. Since 1998, Benin has undergone a decentralization process that became effective with local elections in 2002-2003. The dataset covers the two local elections (2002 and 2008) and the 77 municipalities of Benin. The empirical analysis provides evidence of strategic interactions between Beninese local governments with respect to current expenditures; and of interactions among neighboring municipalities for those municipalities that are close to each other in terms of ethnic composition. Moreover municipalities adopt opportunistic behavior before elections by increasing public spending, and communes whose mayor has the same political affiliation as the president enjoy higher public spending.

**Tax war in Brazil.** Brazilian states have considerable autonomy to set their VAT rates and bases. De Melo (2007) tests for horizontal tax competition in the value-added tax (VAT) for a sample of Brazilian states in 1985-2001. His empirical findings, based on the estimation of a tax reaction function in an error-correction set-up, confirm the hypothesis of horizontal tax competition. The states react strongly to changes in their neighbors VAT code, especially those that belong to the same region. There appears to be a Stackelberg leader among the states with remaining jurisdictions responding strongly to its policy moves. Haddad (2006) uses an interregional general equilibrium model to evaluate the welfare effects of an experimental game of tax competition between two regional governments in the Brazilian federal system. The model accounts for both horizontal and vertical fiscal relationships. The results display a welfare-improving Nash equilibrium, which runs encounter to most theoretical results. The fiscal externalities of tax competition matter for such outcome not only because of  the mobility of the regional tax base but also because of the substitution effect between regional goods and international goods since tax competition reduces domestic prices. Additionally, the constitutional rules impose a rigid mechanism of fiscal transfers from central to regional government and contribute to alleviating pressures on regional public goods because an increase in the central government tax base increase regional government revenue. Then, inter-jurisdictional tax competition in Brazil is associated with gains in private consumption that overcome the reduction in regional public good provisions, reinforcing the welfare-improving equilibrium.

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