Leviathan and Fiscal Illusion in Local Government Overlapping Jurisdictions
This paper integrates two models of local government behavior, leviathan and fiscal illusion, into the framework of overlapping jurisdictions. Estimation of the leviathan and fiscal illusion variables without accounting for vertical effects between overlapping jurisdictions results in overestimation of the horizontal effects. Using a median voter model and municipal and county data we find support for the leviathan model using traditional tests. These effects are largely offset, however, when the test is set within the context of the vertical relationship. We find that municipal per capita expenditures and county per capita expenditures are symmetrically complementary.
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