Is There a Leviathan in Your Neighborhood
Abstract
This paper measures effects of in local government hierarchies on local public sector size. This sector shrinks if decentralization encourages competition among governments. It expands if decentralization sacrifices scale economies. In a sample of 3,022 counties, larger county governments reduce competition and increase aggregate local public sector size, relative to aggregate county income. More cities and towns increase competition and reduce its size. More special and school districts sacrifice scale economies and increase it. Two recent articles have attempted to identify the effects of in state and local government on the size of the state and local public sector. Wallace Oates (1985) finds no important effects. Michael Nelson (1987) finds modest evidence that increased competition among government units reduces the size of the public sector. This article demonstrates that the effects of are important and complex. Decentralization which encourages competition reduces the size of the local public sector. Decentralization which discourages scale economies increases it.
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