Book Description

This study investigates strategic interaction among county governments in local economic development and in the provision of public services. Decentralization of welfare has given counties the added responsibility of providing income and jobs for residents. Localization of economic development and decentralization of welfare programs may intensify intergovernmental competition among local governments. County governments in the United States may act strategically by setting lower welfare benefit levels, and by offering business incentives to new firms, thus resulting in the possible under-provision of local public services. Key objectives of this study are to implement an empirical model for measuring whether localization of economic development activities and devolution of welfare program administration leads to heightened aggressiveness of the economic development activities of county governments. Also, the study investigates whether redistributive services provided by county governments are influenced by interjurisdictional competition and other attributes of counties. County-level data from 46 states in the United States are used in the analyses. Spatial econometric models are used to test the hypothesis that county governments choose economic development activities interdependently. The hypothesis that devolution of welfare leads to heightened interjurisdictional competition for economic development and a race to the bottom in the provision of local public services is also tested. The empirical analysis reveals that localization of economic development activities and devolution of welfare programs lead to heightened aggressiveness in the economic development activities of county governments. Economic development activities in one community affect the economic development activities in neighboring communities. Although there are spatial interactions between county governments in their economic development activities, devolution of welfare programs does not lead to increased aggressiveness in economic development. The results indicate that the presence of an economic development professional on staff and the existence of an industrial park lead to increased aggressiveness in economic development activities of county governments. The analysis does not show evidence of a race to the bottom in the provision of local public services.