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This article uses cross-national data to examine the effects of scal and political decentralisationon subnational governments’ social expenditures. It revisits the benet competition hypothesis put forwardby scal federalism research, which posits that subnational governments in decentralised countries matchwelfare benet reductions by their peers to keep taxes low and avoid an in-migration of welfare dependents.As a consequence, subnational social expenditures are assumed to plateau at similar and low levels. Using anew cross-national dataset on social expenditures in 334 subnational units across 14 countries and 21 years,the author explores whether benet competition causes subnational governments to converge on similarlevels of social spending. The analysis reveals that as countries decentralise, subnational social spendinglevels begin to diverge rather than converge, with some subnational governments reducing their socialexpenditures and others increasing them. Furthermore, decentralisation is not likely to be associated withlowest common denominator social policies, but with more variability in social expenditure. The article alsoexamines the effects of other macro-level institutions and demonstrates that policy coordination inuencesthe relationship between decentralisation and subnational social spending levels.
