Institutions and the Market for Annexable Land

Abstract

The annexation activity of municipalities is studied in a market framework. A sample of 659 municipalities of 25,000 or more population is used to analyze the effects of municipal government structure and annexation statutes on municipal government behavior. Both annexation laws and types of municipal governments are found to be significant determinants of the level of municipal annexation activity. Since some studies indicate that annexation activity affects municipal efficiency, these results have policy implications for state legislators who control the institutions under which municipalities operate. HEN DOUGLASS c. NORTH RECEIVED THE ALFRED NOBEL MEMORIAL Prize W in Economics in 1993, he lectured on the importance of political and economic institutions in economic performance (North 1993). Institutions provide the rules within which organizations function, including municipal government organizations. Unfortunately, few studies have been made which identify the impact of state and local institutions on municipal government behavior. None has been made in a framework that accounts for market forces that might influence annexation activity.The major function of municipal governments is to provide services, and their ability to provide services depends on the economic base, institutions, and political and social forces. The economic base of a municipality is a function of many factors, including the ability of a municipality to expand its boundaries (usually through annexation of fringe areas) to recapture higher income residents and businesses who have left the municipality and to capture new urban fringe residents who have migrated from other areas Annexation is an important issue for municipal governments because the relative ease by which a municipality can annex influences its ability to protect its economic base.' Moreover, the objectives and behavior of municipal governments are related to the phenomenon of urban sprawl and suburban development Gaines Liner is an associate professsor, and Rob Roy

Fiscal Impact of Annexation Methodology on Municipal Finances in North Carolina

“…First, municipal population provides the total population by municipality at the end of the study period and seeks to determine if overall population influenced the finances of North Carolina municipalities. First, the percentage of the municipal population with a college degree and the median household income provide an insight into the level of education and earnings of municipal populations (Edwards and Xiao 2009;Liner 1990;Liner and McGregor 1996). Previous scholarly Bureau, 1990Bureau, , 2000Bureau, , 2010 Density Population density, people per square mile; Source: US Census Bureau, 1990Bureau, , 2000Bureau, , 2010 White Population classified as white; Source: US Census Bureau, 1990Bureau, , 2000Bureau, , 2010 Urban Population Population classified as urban; Source: US Census Bureau, 1990Bureau, , 2000Bureau, , 2010 College Population with a college degree; Source: US Census Bureau, 1990Bureau, , 2000Bureau, , 2010 Income Medain Household Income; Source: US Census Bureau, 1990Bureau, , 2000 literature found a connection between increased densities and improved economic health of a municipality (Edwards and Xiao 2009;Liner 1990;Rusk 2003Rusk , 2006.…”

“…The majority of the literature on municipal annexation has tended to focus on classifying annexation activity at the state level of analysis (Hill 1978;Palmer and Lindsey 2001;Sengstock 1960;Southern Growth Policies Board 1980;Steinbauer et al 2002;USACIR 1993) and the impact of annexation method on the frequency of annexation (Dye 1964;Edwards 2011;Facer II 2006;Feiock and Carr 2001;Galloway and Landis 1986;Liner 1990;Liner and McGregor 1996;Palmer and Lindsey 2001). The classification work completed by scholars has often tried to categorize states according to the prevailing method of annexation used by municipalities in each state.…”

“…Studies into the frequency of annexation activity have tended to utilize these classification systems to estimate the impact of annexation method on overall annexation activity Edwards 2011;Facer II 2006;Galloway and Landis 1986;Liner 1990;Liner and McGregor 1996;Palmer and Lindsey 2001). In general, the results of these studies have been mixed.…”

“…In addition to the municipal annexation variables included within the study, several other measures related to the urbanization, socio-economic status and municipal finances of North Carolina cities were also included in the regression models in an attempt to control for the influences of these variables on the fiscal health of municipalities in North Carolina (Table 1). These additional independent variables were identified after a thorough review of the literature Edwards and Xiao 2009;Liner 1990;Liner and McGregor 1996;Rice 2008). All data was obtained through three principal sources: the US Census Bureau's Boundary and Annexation Study, the North Carolina State Data Center (2013) and the North Carolina Secretary of State's Office (NCSOS).…”

“…The socio-economics differences of the municipalities were explored through the inclusion of several variables in the models. First, the percentage of the municipal population with a college degree and the median household income provide an insight into the level of education and earnings of municipal populations (Edwards and Xiao 2009;Liner 1990;Liner and McGregor 1996). These two variables are both expected to be positively correlated with municipal fiscal health.…”