Does Local Government Fragmentation Reduce Local Spending?

Abstract

This study uses multiple measures of fragmentation and decentralization to assess the effects of these conditions on total local spending in 126 metropolitan regions and 538 counties in the same regions in 2002. The measures are derived from a recognized scheme that distinguishes among total, horizontal, and vertical dimensions of these conditions, and the models control for other causes of total local spending, including sprawl and interlocal spending. The study finds support for the claim that total spending by local governments is higher in regions and counties with more single purpose governments (vertical fragmentation), but also jurisdictions where a greater percentage of spending is done by counties (centralization). Findings also vary by unit of analysis and type of special purpose government, which suggests that the effects of governing structure are not as straightforward as theory suggests.

Determinants of Debt Concentration at the State Level

“…As discussed in the literature review, multiple local governmental units may reduce transparency by adding opaque layers of taxation, or additional government units may increase efficiency through competition in a Tiebout world. At its core, this is the same centralization/decentralization argument in fragmentation literature (Hendrick, Benedict, and Lal ). Following Hendrick, Benedict, and Lal (), we use three measures of fragmentation to account for decentralization.…”

“…Dolan () finds that fragmentation drives up the cost of government in Chicago, and Berry () finds that increased overlap in jurisdictions increases the total spending in U.S. counties. Hendrick, Benedict, and Lal () identifies various types of fragmentation and finds mixed results that can be used to support both claims that centralization and fragmentation can reduce spending, depending on how they are measured. With increased fragmentation, each jurisdiction operates in its own self‐interest with little concern for its actions (such as issuing debt) on the broader community.…”

Fragmented local governance and water resource management outcomes

“…R_HHI: The last indicator employed in this study is the Hirschman-Herfindahl Index, which is employed by some recent studies in the social sciences investigating the consequences of political fragmentation, such as Grassmueck and Shields (2010) and Hendrick et al (2011). As explained in Grassmueck and Shields (2010), this indicator, defined below, can have a value between 1/n (a more fragmented structure) and 1 (a 14 consolidated setting) and effectively represent the level of power concentration based upon government expenditure information.…”

Interjurisdictional Competition and Intracity Fiscal Disparity across Chinese Prefectural Cities

“…The local leaders compete fiercely for a limited number of promotion chances, mainly depending on their fiscal performance (Liu and Martinez‐Vazquez ; Lü and Landry ; Zhang ). Since the total number of local governments depends on the size of population, the number of local (county‐level) governments standardized by population is often used as a measurement for local government competition in U.S. studies (Hendrick et al ; Jimenez ). As both the total number of local governments and relocation of businesses depend on the geographic area, we also include the total number of governments per 10,000 square kilometers to measure the degree of competition (Zax ).…”