Summary and conclusions
The purpose of this paper has been to extend the type of positive economic analysis of the urban public economy that has been initiated by Wagner and Martin (1978), Wagner and Weber (1975), Ostrom et al. (1976), and others. The hypothesis was tested that restricting the growth of single-purpose special districts renders local service industries more monopolistic and should therefore increase local public expenditure levels. Evidence brought forth indicates that the effect of such restrictions imposed in two states, California and Oregon, was to increase general per capita expenditures, ceteris paribus. Per capita expenditures on water supply and fire protection, two services frequently provided by special districts, were also seen to increase dramatically after controlling for other supply and demand determinants of local public expenditures. Thus the empirical test of the last section supports the monopoly-enhancing view of special district growth restrictions and leads us to reject the alternative reformist hypothesis that consolidating or annexing special districts will lead to improved hierarchical organization of local government and diminish the cost of providing local public services.
As the economics of regulation would predict, regulating the growth of special districts is a way that local politicians and bureaucrats can use the powers of the state to limit entry into the local government industry, thereby enhancing their monopoly power.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Advisory Commission on Intergovernmental Relations. (1964).The problem of special districts in American government. Washington, D.C.: U.S. Government Printing Office.
Barzel, Y. (1969). Two propositions on the optimum level of producing public goods.Public Choice 6(Spring): 270–79.
Bish, R. L. (1971).The public economy of metropolitan areas. Chicago: Markham.
Bish, R. L., and Nourse, H. (1975).Urban economics and policy analysis. New York: McGraw-Hill.
Bollens, J. C. (1957).Special district government in the U.S. Berkeley: University of California Press.
Bradford, D. F., and Oates, W. E. (1974). Suburban exploitation of central cities and governmental structure. In H. Hochman and G. Peterson (Eds.),Redistribution through public choice. New York: Columbia University Press. 43–92.
Buchanan, J. M. (1970). Principles of urban fiscal strategy.Public Choice 8(Spring): 1–16.
Cook, G. A. (1973). Effect of metropolitan government on resource allocation: The case of education in Toronto.National Tax Journal 26(December): 585–90.
Downing, P. B. (1969).The economics of urban sewage disposal. New York: Praeger.
Downing, P. B. (Ed.). (1977).Local service pricing policies and their effect on urban spatial structure. Vancouver: University of British Columbia Press.
Downing, P. B., and DiLorenzo, Thomas J. (1981). User charges and special districts. In R. Aranson and E. Schwartz (Eds.),Management policies in local government finance. Washington, D.C.: International City Management Association.
Greene, K. V., and Munley, V. G. (1979). Generating growth in public expenditures: The role of employee and constituent demand.Public Finance Quarterly 7(January): 92–109.
Greene, K. V., and Munley, V. G. (1978). Fiscal illusion, the nature of public goods, and equation specification.Public Choice 33: 95–100.
Gusteley, R. D. (1978). The allocational and distributional impacts of government consolidation: The Dade County experience. In R. L. Lineberry (Ed.),The politics and economics of urban services. Beverly Hills: Sage. 87–102.
Henderson, J. V. (1979). Theories of group, jurisdiction and city size. In P. Mieszkowski and M. Straszheim (Eds.),Current issues in urban economics. Baltimore: Johns Hopkins Press.
Hirsch, W. Z. (1970).The economics of state and local government. New York: McGraw-Hill.
Margolis, J. (1974). Public policies for private profits: Urban government. In H. Hochman and G. Peterson (Eds.),Redistribution through public choice. New York: Columbia University Press. 289–319.
Ostrom, E. (Ed.) (1976).The delivery of urban services: Outcomes of change. Beverly Hills: Sage.
Savas, E. S. (1974). Municipal monopolies versus competition in delivering urban services. In W. D. Hawley and D. Rogers (Eds.),Improving the quality of urban management. Beverly Hills: Sage.
Stigler, G. J. (1957). The tenable range of functions of local government. In U.S. Congress, Joint Economic Committee on Federal Expenditure Policy for Economic Growth and Stability. 213–19.
Tiebout, C. (1956). A pure theory of local government expenditures.Journal of Political Economy 64(October): 416–24.
Tullock, G. (1965).The politics of bureaucracy. Washington, D.C.: Public Affairs Press.
Tullock, G. (1972). Review of Niskanen's bureaucracy and representative government.Public Choice 12(Spring): 119–24.
Wagner, R. E. (1974). Supply-side aspects of the theory of local government: Owners, managers, and take-over bids. Working paper CE-74-6-3, Center for Study of Public Choice, VPI & SU.
Wagner, R. E., and Martin, D. (1978). The institutional framework for municipal incorporation: An economic analysis of local agency formation commissions in California.Journal of Law and Economics 21(October): 404–25.
Wagner, R. E., and Weber, W. (1975). Competition, monopoly and the organization of government in metropolitan areas.Journal of Law and Economics 18(December): 661–84.
Author information
Authors and Affiliations
Additional information
Helpful comments on an earlier version of this paper were provided by Paul B. Downing, Roger L. Faith, T. Nicolaus Tideman, and Carolyn L. Weaver. I assume full responsibility for any errors.
Rights and permissions
About this article
Cite this article
Dilorenzo, T.J. The expenditure effects of restricting competition in local public service industries: The case of special districts. Public Choice 37, 569–578 (1981). https://doi.org/10.1007/BF00133753
Issue Date:
DOI: https://doi.org/10.1007/BF00133753