Metropolitan Governance Structure and Income Growth

Abstract

There has long been debate on the extent to which the structure of government in metropolitan areas helps or hinders income growth. Polycentrists contend that numerous local governments lead to competition that streamlines government, produces services at least cost, and leads to higher incomes. Centrists argue that large, multiple service governments have scale economies leading to more efficient production of services and hence higher incomes. What matters to regionalists is whether there is a metropolitan governance arrangement that effects an improvement in the distribution of economic activity that increases income. Which school of thought is right? This article evaluates the association between metropolitan governance structures and growth in per capita personal income among Ͻ287 of the largest metropolitan statistical areas for the period 1976 to 1996. After controlling for several factors, we find empirical support for the centrist and regionalist schools of thought but very little support for the polycentrist school.A growing literature addresses the link between the structure of governance at the metropolitan level and income growth (Foster, 1993;Nelson, 1990;Ward, 1987). This literature is advanced by "polycentrists," "centrists," and more recently "regionalists" (for a review, see Wallis, 1996).Polycentrists argue that fragmented structures offer greater choice among service and tax/fee bundles for residents and firms with diverse preferences, constrain the costs of local government through competition, elevate overall government performance through experimentation by many units of governments at different levels, and increase the level of political representation and participation by individuals. Centrists counter that consolidated structures are more desirable because they capture efficiencies in economies of scale and agglomeration of talent, internalize externalities, promote fiscal equity, facilitate more efficient coordination of land use and facility planning, and economize on the potentially costly concessions common to many well-publicized competitions for "marquee" firms. In recent years, a third school of thought, espoused by regionalists, has downplayed traditional concerns about the actual arrangement of municipal governments to focus instead on the existence of regionwide mechanisms for collaborative decision making.The persistence and intensity of the debate stem from its policy relevance. As regions respond to the imperatives of global competition, public officials, policy analysts, and citizens seek to know

Urban Governance Structure and Wage Disparities across US Metropolitan Areas

“…Most of the studies focus on its relationship with the rate of local economic growth (as Nelson and Foster, 1999;Paytas, 2001;Stansel, 2005;Hammond and Tosun, 2011), which is usually analysed in cross sectional growth models adopting the convergence approach pioneered by Barro (1991) and criticized as uninformative and perhaps misleading for both theoretical and empirical reasons (Cheshire and Malecki, 2004;Cheshire and Magrini, 2009). To the best of our knowledge, Ahrend et al (2014a) is the only study that analyses the impact of fragmented governments on productivity premia in five OECD countries.…”

Fragmentation, sprawl and economic development.

“…As noted in Chapter I, numerous studies call for additional investigation into the issues of metropolitan governance, fragmentation and sprawl (ACIR, 1987;Altshuler et al, 1999, Lewis, 1996Nelson and Foster, 1999). Discussion earlier in this chapter shows that empirical research provides support for both monocentric and polycentric theories of metropolitan governance; however, this evidence is limited and contradictory.…”

“…One of the more compelling arguments for the monocentric theory in a study examining the links between economic performance of metropolitan areas and the structure of governance was made by Nelson and Foster (1999). In this study of 287 metropolitan areas the authors analyzed the impact of metropolitan governance structure on income growth controlling for a variety of additional factors.…”

“…Researchers following the public choice tradition argue that polycentric system offers closer match for public preferences in taxes and services. Competition between jurisdictions in fragmented systems ensures better quality and lower costs of the services provided, and it offers investors economic inducements that are not achievable in centralized setting (Nelson & Foster, 1999). Variations in size and number of governments better reflect differences in economies of scale for labor-intensive and capital intensive types of services (ACIR, 1987).…”

“…For the most part, the arguments are subjective and based on value judgments. When empirical support does emerge (Nelson and Foster, 1999), the analysis suggests solutions that are closer to the regional cooperation and planning than to the ideas of government consolidation.…”