Beyond Borders: Governmental Fragmentation and the Political Market for Growth in American Cities

• Author: Eric Stokan,Aaron Deslatte
• Published date: 01 September 2019
• Date: 01 September 2019
• DOI: http://doi.org/10.1177/0160323X20915497
• Subject Matter: General Interest

General Interest
State and Local Government Review
2019, Vol. 51(3) 150-167
Beyond Borders: Governmental
ª The Author(s) 2020
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Fragmentation and the Political
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DOI: 10.1177/0160323X20915497
Market for Growth in American
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Cities
Eric Stokan1 and Aaron Deslatte2
Abstract
Political fragmentation has been conceptualized as a phenomenon which increases competition for
mobile citizens and jobs between local governments within the same region. However, the empirical
basis for this nexus between governmental fragmentation and increased competition for develop-
ment is surprisingly lacking. Utilizing a newly constructed database that matches political fragmen-
tation indices (horizontal, vertical, and bordered) to a nationwide survey of economic development
officials in 2014, we begin to fill this gap by analyzing the influence fragmentation has on the use of tax
incentives, regulatory flexibility, and community development tools in U.S. cities. Applying the
political market framework and a Bayesian inferential approach, we find that the proliferation of local
governments increases incentive use. However, more specialized governance increases the prob-
ability of using community development activities.
Keywords
fragmentation, economic development, political markets, public choice theory, polycentricity
Metropolitan regions in the United States have
competition for the usage of economic develop-
long been recognized as constellations of
ment incentives is surprisingly lacking.
diverse governmental types in which authority
This article begins to fill this gap by empiri-
is partitioned between general-purpose munici-
cally examining the effects of fragmentation on
palities and overlapping, special district, or
different economic development activities. To
single-purpose governments. A criticism of
do so, it examines economic development pol-
fragmented metropolitan governance in the
icy choices through two competing theoretical
context of economic development tends to fol-
low a traditional logic: fragmentation increases
1
competition by creating additional avenues for
Department of Political Science, University of Maryland,
Baltimore County, MD, USA
companies, realtors, developers, and investors
2 O’Neill School of Public and Environmental Affairs,
to seek favorable incentive deals, reducing the
Indiana University Bloomington, IN, USA
focus on broader questions of sustainable
environmental and social governance (Fleisch-
Corresponding Author:
Eric Stokan, Department of Political Science, University of
mann, Green, and Kwong 1992). However, the
Maryland, Baltimore County, 1000 Hilltop Circle, Baltimore,
empirical basis for a causal linkage between
MD 21250, USA.
governmental fragmentation and increased
Emails: estokan@umbc.edu; ericjstokan@gmail.com

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Stokan and Deslatte
151
lenses: public choice and institutional reform.
the probability of reliance on property tax–
Public choice scholars have long suggested
based incentives.
polycentric systems of governance produce
more efficient allocations of resources through
greater competitive pressure as local govern-
Political Markets for
ments vie to attract mobile citizens (Ostrom,
Development Policies and the
Tiebout, and Warren 1961; Tiebout 1956). The
Dimensions of Fragmentation
“institutional reform” perspective favors gov-
ernment consolidation or regionalism and
In many contexts globally, local governments
expects generally that government spending
coexist in an ecology of competing and coop-
and tax liability will increase in more fragmen-
erating service delivery organizations (Black-
ted regions through unnecessary duplication of
mond Larnell 2018; Hall, Matti, and Zhou
services (Hendrick, Jimenez, and Lal 2011;
2018). Concerning questions of efficiency,
Wheeler 2002). From this view, incentivizing
growth, and citizen responsiveness, U.S. local
economic growth through intramunicipal cor-
government research has devoted considerable
porate relocations is a temptation for local gov-
attention to this landscape and demarcates the
ernment officials to “overspend.” This by no
impacts of fragmentation between horizontal
means restricted to the U.S. experience.
and vertical dimensions (Hendrick and Shi
2015). Horizontal fragmentation results from
Regional governance institutions such as
having a greater number of general-purpose
multipurpose special districts in places like
political jurisdictions spatially adjacent to one
British Columbia, Canada, have drawn con-
another within a metropolitan area (Boyne
siderable recent attention from scholars as
1992). Vertical fragmentation results from the
an alternative for U.S. metropolitan areas
layering of government (single and general pur-
(Wolman 2019). The negative effects of frag-
pose) with overlapping political jurisdictions
mentation have garnered attention in places
contained within the metropolitan area. This
like the Netherlands (Klok et al. 2018), while
distinction is important given that each produce
U.S. levels of fragmentation have been labeled
varying allocations of service responsibility
on par with urban regions in France, Germany,
and tax authority between local governments
and Switzerland (UCLG 2008), and European
(Deslatte, Feiock, and Wassel 2017). In terms
interest in regional versus fragmented metro-
of government spending and growth, public
politan governance arrangements is on the rise
choice versus institutional reform scholars have
(Hulst and van Montfort 2007; Lidstro¨m 2017).
developed fundamentally different views on
This article advances this discussion by
what should occur when metropolitan regions
applying a political market framework (PMF)
are more fragmented, cutting across both hori-
to test the impacts of horizontal, vertical, and
zontal and vertical dimensions (Hendrick and
bordered (cross-state dimensions) fragmenta-
Shi 2015; Howell-Moroney 2008). Public
tion on the use of community development and
choice scholars hold that more fragmented gov-
tax incentive tools among U.S. cities. Employ-
ernment service delivery tends to constrain
ing a Bayesian analytic approach, this article
spending due to competition between govern-
finds evidence of an interaction effect between
ments for mobile citizens, while institutional
the institutional structure of executive authority
reformers claim fragmentation leads to ineffi-
in U.S. cities and the distinct dimensions of
ciencies and overproduction of public goods
metropolitan-level fragmentation. Horizontal
(Berry 2008, 2009). In his summary of the
fragmentation is associated with increased eco-
empirical evidence, Goodman (2019) notes that
nomic incentive use by municipalities, while
much depends upon how these concepts are
vertical fragmentation has the opposite effect.
operationalized. When it comes to government
The proliferation of single-purpose or special
spending, the empirical evidence finds support
district governments acts as a check, reducing
for the public choice view, with greater

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152
State and Local Government Review 51(3)
horizontal fragmentation associated with lower
constraints, externalities, and imperfect com-
per capita spending (Stansel 2005). However,
petition (Fischel and Oates 2006).
vertical fragmentation operationalized as a per-
Scholars have noted the need to account for
centage of all local governments has produced
the internal political dynamics of development
mixed evidence (Jimenez 2015), with evidence
policies in the context of the broader metropol-
of expenditure growth in support of the reform
itan ecology of governments (Craw 2008;
view found when vertical fragmentation is
Minkoff 2012). We argue attention to policy
operationalized as special districts per capita
tools or instruments in the context of fragmen-
(Hendrick, Jimenez, and Lal 2011) or as the
tation is also necessary in order to ascertain the
number of “overlapping” districts per munici-
distributional intent of development policies
pality (Berry 2008, 2009).
(R. C. Feiock, Tavares, and Lubell 2008). A
PMF has been utilized in recent years to link
these perspectives by focusing on the collective
Institutional Arrangements and Horizontal
choice rules within political institutions which
influence the policy process through transac-
Fragmentation
tion costs and the distribution of benefits across
While the fragmentation literature also consid-
community groups (Lubell, Feiock, and
ers economic growth (usually with population
Ram´ırez de la Cruz 2005). Under a political
or employment as the outcome measure), the
market framework, policy change results from
evidence is far more circumspect and does not
a dynamic contracting process in which gov-
support one perspective over the other (Ham-
ernment and industry actors seek institutional
mond and Tosun 2011). While competition
and policy arrangements set to minimize trans-
may influence developmental policies, devel-
action costs and maximize group benefits
opment policy choices are also influenced by
(Lubell, Ram´ırez de la Cruz 2009). Adapted
internal political demands of residents seeking
to development policies, firms are conceived
to maximize home values (Fischel 2009), the
of as policy demanders petitioning local gov-
proximity to other local government offering
ernmental suppliers for favorable policy out-
similar policies (Minkoff 2012), and income
puts in the form of developmental policies
differentiation (Overton 2016).
(Feiock and Kim 2001). Local...