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The expenditure effects of restricting competition in local public service industries: The case of special districts

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  • Thomas Dilorenzo

Abstract

The purpose of this paper has been to extend the type of positive economic analysis of the urban public economy that has been initiated by Wagner and Martin (1978), Wagner and Weber (1975), Ostrom et al. (1976), and others. The hypothesis was tested that restricting the growth of single-purpose special districts renders local service industries more monopolistic and should therefore increase local public expenditure levels. Evidence brought forth indicates that the effect of such restrictions imposed in two states, California and Oregon, was to increase general per capita expenditures, ceteris paribus. Per capita expenditures on water supply and fire protection, two services frequently provided by special districts, were also seen to increase dramatically after controlling for other supply and demand determinants of local public expenditures. Thus the empirical test of the last section supports the monopoly-enhancing view of special district growth restrictions and leads us to reject the alternative reformist hypothesis that consolidating or annexing special districts will lead to improved hierarchical organization of local government and diminish the cost of providing local public services. As the economics of regulation would predict, regulating the growth of special districts is a way that local politicians and bureaucrats can use the powers of the state to limit entry into the local government industry, thereby enhancing their monopoly power. Copyright Martinus Nijhoff Publishers 1981

Suggested Citation

  • Thomas Dilorenzo, 1981. "The expenditure effects of restricting competition in local public service industries: The case of special districts," Public Choice, Springer, vol. 37(3), pages 569-578, January.
    • Handle: RePEc:kap:pubcho:v:37:y:1981:i:3:p:569-578
    DOI: 10.1007/BF00133753
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    References listed on IDEAS

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    1. Wagner, Richard E & Weber, Warren E, 1975. "Competition, Monopoly, and the Organization of Government in Metropolitan Areas," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 661-684, December.
    2. Martin, Dolores Tremewan & Wagner, Richard E, 1978. "The Institutional Framework for Municipal Incorporation: An Economic Analysis of Local Agency Formation Commissions in California," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 409-425, October.
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    Cited by:

    1. Mark Schneider, 1986. "Fragmentation and the growth of local government," Public Choice, Springer, vol. 48(3), pages 255-263, January.
    2. Stephen Mehay, 1984. "The effect of governmental structure on special district expenditures," Public Choice, Springer, vol. 44(2), pages 339-348, January.
    3. Keith Dowding & Peter John & Stephen Biggs, 1994. "Tiebout : A Survey of the Empirical Literature," Urban Studies, Urban Studies Journal Limited, vol. 31(4-5), pages 767-797, May.
    4. Alexander Fink & Richard Wagner, 2013. "Political entrepreneurship and the formation of special districts," European Journal of Law and Economics, Springer, vol. 35(3), pages 427-439, June.
    5. Juan Luis Gómez-Reino & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2021. "Evidence on economies of scale in local public service provision: a meta-analysis," Working Papers. Collection A: Public economics, governance and decentralization 2103, Universidade de Vigo, GEN - Governance and Economics research Network.
    6. Robert Blewett, 1984. "Off-budget activities of local government: Comment," Public Choice, Springer, vol. 42(2), pages 205-211, January.
    7. Juan Luis Gómez‐Reino & Santiago Lago‐Peñas & Jorge Martinez‐Vazquez, 2023. "Evidence on economies of scale in local public service provision: A meta‐analysis," Journal of Regional Science, Wiley Blackwell, vol. 63(4), pages 793-819, September.
    8. Jorge Martinez-Vazquez, 2013. "Fiscal Decentralization in Peru: A Perspective on Recent Developments and Future Challenges," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1324, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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