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The Interaction Between Public and Private Governments: An Empirical Analysis

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  • Ron Cheung

    ()
    (Department of Economics, Florida State University)

Abstract

Private governments, found in planned developments and condominiums, are increasingly common methods of delivering local services to residents. This paper provides the first empirical study of their impact on local public finance. A novel dataset of homeowners' associations allows construction of a panel of private governments in California. Panel methods test whether public expenditures respond to private government prevalence. Estimates indicate that local governments lower spending moderately in response to private government activity, consistent with strategic substitution. The paper then examines various mechanisms to explain this downloading and shows that the substitutability between public and private providers is key to which services ere downloaded. Evidence also suggests that the economies of scale in service production in small cities temper the offloading of public services to private governments.

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File URL: ftp://econpapers.fsu.edu/RePEc/fsu/wpaper/wp2004_11_01.pdf
File Function: First version, 2004
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Bibliographic Info

Paper provided by Department of Economics, Florida State University in its series Working Papers with number wp2004_11_01.

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Length: 46
Date of creation: Nov 2004
Date of revision: Feb 2007
Handle: RePEc:fsu:wpaper:wp2004-11-01

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Web page: http://www.coss.fsu.edu/economics/
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Keywords: private government; planned development; gated community; strategic interaction; strategic substitution; downloading; condominium;

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References

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  1. Matsusaka, John G, 1995. "Fiscal Effects of the Voter Initiative: Evidence from the Last 30 Years," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 587-623, June.
  2. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  3. Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
  4. Brooks, Leah, 2007. "Unveiling Hidden Districts: Assessing the Adoption Patterns of Business Improvement Districts in California," National Tax Journal, National Tax Association, vol. 60(1), pages 5-24, March.
  5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  6. Helsley, Robert W. & Strange, William C., 2000. "Potential competition and public sector performance," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 405-428, July.
  7. Greene, Kenneth V & Nelson, Phillip J, 1994. "Legislative Majorities and Alternative Theories of the Size of Government," Public Finance = Finances publiques, , vol. 49(1), pages 42-56.
  8. Ron Cheung, 2005. "The Effect of Property Tax Limitations on Residential Private Governments," Working Papers wp2005_05_01, Department of Economics, Florida State University.
  9. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
  10. Austin, D. Andrew, 1999. "Politics vs Economics: Evidence from Municipal Annexation," Journal of Urban Economics, Elsevier, vol. 45(3), pages 501-532, May.
  11. Tracy M. Gordon, 2003. "Crowd out or crowd in?: The effects of common interest developments on political participation in California," The Annals of Regional Science, Springer, vol. 37(2), pages 203-233, 05.
  12. J. Miguel Villas-Boas & Russell S. Winer, 1999. "Endogeneity in Brand Choice Models," Management Science, INFORMS, vol. 45(10), pages 1324-1338, October.
  13. Helsley, Robert W. & Strange, William C., 1998. "Private government," Journal of Public Economics, Elsevier, vol. 69(2), pages 281-304, June.
  14. Aronsson, Thomas & Lundberg, Johan & Wikstrom, Magnus, 2000. "The impact of regional public expenditures on the local decision to spend," Regional Science and Urban Economics, Elsevier, vol. 30(2), pages 185-202, March.
  15. Duncombe, William D, 1992. "Costs and Factor Substitution in the Provision of Local Fire Services," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 180-84, February.
  16. Epple, Dennis & Romer, Thomas, 1989. "On the flexibility of municipal boundaries," Journal of Urban Economics, Elsevier, vol. 26(3), pages 307-319, November.
  17. Helsley, Robert W. & Strange, William C., 1999. "Gated Communities and the Economic Geography of Crime," Journal of Urban Economics, Elsevier, vol. 46(1), pages 80-105, July.
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Citations

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Cited by:
  1. Ron Cheung, 2005. "The Effect of Property Tax Limitations on Residential Private Governments," Working Papers wp2005_05_01, Department of Economics, Florida State University.
  2. Meltzer, Rachel, 2011. "“Clean And Safe” For All? The Interaction Betweeen Business Improvement Districts And Local Government In The Provision Of Public Goods," National Tax Journal, National Tax Association, vol. 64(3), pages 863-89, September.
  3. Brooks, Leah & Strange, William C., 2011. "The micro-empirics of collective action: The case of business improvement districts," Journal of Public Economics, Elsevier, vol. 95(11), pages 1358-1372.

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