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The interaction between public and private governments: An empirical analysis

  • Cheung, Ron

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 data set 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 are 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: http://www.sciencedirect.com/science/article/B6WMG-4PDSBJ4-7/2/cdedcbf7420d7f55f5a8d3a5620beaa4
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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 63 (2008)
Issue (Month): 3 (May)
Pages: 885-901

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Handle: RePEc:eee:juecon:v:63:y:2008:i:3:p:885-901
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. 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.
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  9. Ron Cheung, 2005. "The Effect of Property Tax Limitations on Residential Private Governments," Working Papers wp2005_05_01, Department of Economics, Florida State University.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. Austin, D. Andrew, 1999. "Politics vs Economics: Evidence from Municipal Annexation," Journal of Urban Economics, Elsevier, vol. 45(3), pages 501-532, May.
  17. Jan K. Brueckner, 2003. "Strategic Interaction Among Governments: An Overview of Empirical Studies," International Regional Science Review, , vol. 26(2), pages 175-188, April.
  18. 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.
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