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An Agency Approach to Local Authorities' Behaviour

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  • Ana Bravo
  • Antonio Silvestre

Abstract

This paper aims at presenting a simple model of local decision-making based on the hypothesis of monopoly power on the part of local governments. It adds the contribution of the principal-agent theory by assuming that: (a) monopolistic behavior is constrained by voters’ efforts to monitor the outcomes of policies; (b) local governments’ policies affect local property values. Given those assumptions, the degree of capitalization of property taxes is shown to determine the incentive for voters’ control over policies’ outcomes.

Suggested Citation

  • Ana Bravo & Antonio Silvestre, 2006. "An Agency Approach to Local Authorities' Behaviour," ERSA conference papers ersa06p898, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa06p898
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    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa06/papers/898.pdf
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